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Will October See A Rise In Gold Prices In India? What Is The Expectation?


Today, on the first trading day of October all investors are paying attention to the upcoming gold rates in the month. Today Indian gold rates hiked by Rs. 980/ 10 grams than yesterday. Gold prices in India only experienced a moderate hike since August, but mostly dropped. In July the monthly gold price change was at a positive 2.58%, while in August the same slipped by 2.11%, and again in September, it dropped by 4.08%. In September, the Indian gold rates dropped highest since March 2021 - when the prices were at the lowest levels in this year's range. Hence, if the same bearish trend of September gold rates is passed on to October, the gold traders will certainly sound worried. But the situation changed from yesterday evening.

Will October See A Rise In Gold Prices In India? What Is The Expectation?

Why did gold prices rally yesterday?

Yesterday, both gold futures and spot gold prices stayed mostly in the range between $1722/oz to $1735/oz, till noon; some risk-hedging supported the bullion. But since the evening, the situation has changed. Global gold rates started to hit higher and again crossed the $1755 mark. The reason behind this sudden change was US Federal Reserve Chair Jerome Powell's dovish tone about the country's employment scenario. Today on October 1, both Comex October future and spot gold prices started with the $1755 range, which is a positive tone for gold traders.

October prices expectations

If the situation stays affirmative for gold in October, the metal can stay hefty in the range of $1755 to $1765, or more. But if the rates fall again, it can move around $1725 to $1700 in October. Ahead of the festive season in India, gold traders and the IBJA would prefer to keep gold rates in a strong range. However, that will depend on US economic trends, as gold is a dollar-dominated asset class.

October gold rates, in the whole month, will mostly depend on 2 factors. The US Core Personal Consumption Expenditure (PCE) index for inflation and the August non-farm payroll data will be published in the first week of October. Any positive tune of the employment data and the US inflation can only drag down the gold rates further this month. Otherwise, there are good possibilities that the prices can rally. But if the Federal Reserve, the country's central bank is unhappy with the data and does not tighten the monetary policy soon, gold rates will continue to rally higher.


US employment concerns mattered

In the 1st week of August, gold rates faced a major challenge as the July employment data got published setting a very optimistic tone, suggesting fast recovery along with an earlier-than-expected tapering timeline. This trend continued in September moderately, until Fed Chair Powell testified before the House Committee on Financial Services and commented, the US is still "far from full employment." The central bank will certainly require very promising employment data to back an interest rate hike, which is not expected very shortly now. The August non-farm payroll data can only confirm this. So, the gold rates might hike slowly with any more dovish sentiment from Chair Powell.

US debt ceiling factor

Along with Powell, yesterday, US Treasury Secretary Janet Yellen also testified and said, "Credit of the US would be impaired, and our country will face financial crisis and an economic recession. It's necessary to avert a catastrophic event for our economy." Her comment was in concern with the US debt ceiling; as the government will run out of money on October 18. If the government does not raise the debt limit, the country will default for the first time in history, she cautioned. Yesterday US dollar index fell around 0.10%. With these concerns, if the US dollar index continues to slip in the foreign exchange, the gold rates will again be able to hike in October. However, today the US dollar index stood at 94.30 level in the spot market, today's index change will be analyzed.

However, a gold trader must remember that the expectations of the tapering timeline are not faded away yet. The US Fed will meet again only in November to decide the tapering timeline. They are buying $120 billion in government-backed bonds each month now, which can be reduced. The expectations of tapering are affecting gold even before it starts. Also, as the US 10-year treasury yield is rising again around 1.5%, the gold prices will eventually drop in October. All of these will depend on the inflation and employment data.

US Inflation index

Both of these possibilities of gain and fall are only anticipated now. October gold prices will be influenced by the US Core PCE index which is a preferred tool by the US Fed to measure inflation. Powell commented, "We have to balance inflation and employment. Our expectation is inflation will come down, and we won't have to have the two goals in tension." Higher inflation can influence the central bank to hike interest rates, but that might be barred with poor employment status. So, the PCE data will impact both the tapering timeline, hence the international gold prices. The rates will similarly influence the Indian gold rates.

Gold prices falling will be a positive sign for the common Indians, who will be able to buy gold at lower rates. India imports gold from foreign markets, so the Indian gold prices depend on the ups and downs of the international gold rates. But if the prices continue to hike in the foreign markets, the Indian rates will gain again ahead of the festive season in the country.

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