Gold rates usually gain significantly in the international markets when the US dollar index drops or the economy loses its momentum. But at present, the global scenario has mostly crossed both of these dimensions, as the US dollar is staying upfront and economic activities are also heading north. Yet, gold prices, globally are trying to maintain a moderate level at around $1785/oz, since last week. Although it failed to stay at 2020's peak levels when the Pandemic was also at its peak.
Last traded gold rates
The Comex December gold futures closed at $1781, and the spot market stood at $1784, while the MCX gold futures closed at Rs. 47,386 on October 21. Global gold rates are resisting the path at around $1780 - $1785 now while trying to reach the $1800 level again. The concerns over inflation are helping the gold rates to stay bullish in the spot and futures markets.
USA's Inflation rates
The US Bureau of Labor Statistics has recently released the inflation data for September concerning the Consumer Price Index (CPI). The report showed that the CPI - urban (CPI-U) has gained by 0.4%, crossing the expectations. So, since the last year collectively, items in the index have gained by 5.4%, before seasonal adjustment. The food price and energy prices hiked significantly, as the food index hiked 4%, and the energy index hiked over 24.8%. the inflation data of the US is, thus standing at a 30-years high level. On the other hand, USA's supply chain bottleneck is another challenge, and the IMF is worried about it. Gold is a dollar-dominated asset class, and is inversely related to the US Dollar index. As the US Dollar rises, gold price falls, and vice versa.
However, commodity trader Paul Tudor Jones commented to CNBC that the present inflationary pressures are not just transitory. He also thinks that "the long side of commodity markets will be in keener favor in the coming months."
On the other hand, commenting on the relation between gold rates and inflation, Gary Wagner told Kitco, "This brings us to the double edge sword of inflationary pressures. Initially, the dot plot that was presented by the Federal Reserve during the height of the pandemic inferred that there would be no interest rate hikes through 2021, and 2022. It is now believed that there will be two rate hikes in 2022 to help temper and reduce the record-high inflationary level. As interest rates are raised, gold becomes less favorable as a fixed-income investment such as U.S. debt becomes more favorable."
USA Manufacturing data
Philadelphia Federal Reserve said its manufacturing business outlook fell a reading of 23.8 in October, down from its September reading of 30.7. The data missed expectations as consensus forecasts were calling for reading around 25.1. The report supported the gold markets on a short-term basis. The report additionally mentioned that the Prices Paid Index (PPI) has hiked to 70.3, which is up from 67.3 in September, making it a positive turn for the gold market. Hence, the December gold futures bulls are having the overall near-term technical advantage.
As the gold rates are quite volatile now, the cryptocurrency is rallying significantly and standing above $64,000. The US stock markets are also recovering. The 10-year US Treasury yield is also fetching around 1.66%.
However, gold investors are also worried about the US Fed meeting in November, when they might declare the tapering timeline.