Will Gold Prices Fall Anytime Soon?

Gold prices have been experiencing uncertainty in the MCX since last month. The market is obviously quite down than it was eight to nine months ago.

On 4th August, in MCX (FUTCOM) the gold market opened with Rs. 47920 (per 10 grams). The scale went highest to Rs. 47950. It has seen a 0.17% change in the price. Besides gold, silver started with Rs. 67956 and last traded with Rs. 68156. These fluctuations are impacting the prices of gold in every city in India.

How spot gold prices are moving?

The spot market price of gold is on the other hand trading low at Rs. 47842 per 10 grams. Indian spot gold prices are actually showing a flat scale since July. It is quite down from last year's up-turning curve. Global economic crisis, investors' fear regarding the oil and US dollar helped gold to reach its peak back then. But the situation has changed now.

This happened ahead of US jobs data that is to be released soon this week. The expectations locked the price range tight. Investors are also buoyed by worries due to the spread of the coronavirus delta variant and low bond yields. The Federal Reserve is about to take strong decisions regarding the country's employment scenario and economy. As the Fed takes decisions about bond yields and interest rates the gold prices will again see its pace.

In a meeting earlier on June 16, Fed Governor Jerome Powell elevated the forecast of economic growth and inflation in the states. The Fed additionally projected two likely hikes in interest rates. This tight monetary policy was not expected for all investors; it was a sudden change for some of them. They became skeptical one way or another.

On the other hand, federal banks in other parts of the globe, like in European countries or in Japan, did not think about interest rate hikes in their countries. This certainly says that the US, unlike other countries, is quite focussed to give US dollar a better and stronger hold in the global market.

The economic slowdown of the USA in the last year has triggered the US Fed and their think tanks. This is influencing the gold prices directly. Growing valuation of the US dollar this year is indicating the current trend of falling gold prices in the long term.
But in the currency exchange the valuation of the US dollar did not show much change today (4th August). It actually helped the gold mcx in India to get a better outlook.

The gold market is now overall showing a muted reaction in daily gold prices for both futures and spot. The monthly reactions are prominent though. From January the monthly rates have been falling in big numbers. Certainly it is a good time to invest in gold; but not to sell the gold in reserve.

A larger picture says that gold prices fell (4% in Q1 2021) due to a drop in financial investment demand due to rising US real yields.

A report titled 'Commodity Markets Outlook - April, 2021' states, "The yield on 10-year treasury Inflation-Protected Securities rose from -1% in January to -0.66% in March - its highest level since June 2020. Higher real yields make gold less attractive to investors. Gold-backed exchange-traded funds holdings have also fallen sharply in recent months, and central banks have reduced gold purchases."

Gold prices thrive when the news is negative?

Gold rates tend to outperform when there is pessimism and the world can be full of that. From a Covid third wave to rising inflation, there are more triggers for gold to go up, then down. Gold is a precious metal and identified as a hedge against inflation. Keeping in mind the higher inflation rates likely across the globe, the yellow metal might rise again soon. Beside the physical demand of gold, investments in SGB and through ETF are having promising views. So, time will only be able to tell if gold will continue to glitter this year or not. Investors are certainly hopeful for the long term.