Volatile Gold: 4 Major Factors Currently Weighing On Gold Price

Gold is a store of value and has always been of help in financial stress. While during some years the gains were not that magnificent, there has been seen rocking gains during Covid and in this year too amid the geo-political rift between Ukraine-Russia has spurted to as high as $2050 per ounce.

Volatile Gold: 4 Major Factors Currently Weighing On Gold Price

Gold price gains in Cy 2022

In the wake of the Ukraine Russia crisis, gold rose to high of $2050, climbing 18% YTD in Cy 2022 but now as there were hopes of peace talks and Fed's hawkish move was seen to settle inflationary demon, gold softened in price and hence as per Kitco, the yellow metal's 1-month returns are in the negative zone, while 1-year returns are placed at 11.65% gains internationally.

Factors weighing on gold at the moment or causing the volatility in it

US Fed minutes due to be released this week: While 6 rate increases have already been factored, any more aggressive or hawkish call to tame inflation will be detrimental for gold prices. This is as hawkish or rate increase attempt, makes gold less attractive as the cost of holding non-yielding bullion rises.

Ukraine-Russia tensions: There is no stopping of the war and further there is a threat that the emerged economies such as the UK will cast more sanctions on Russia. This move will however be positive for gold.

Inflation: Inflation world over is hitting multi year highs and we are already vigilant to fuel prices in India which have been on the continuous price. Not just fuel, CNG etc. have also been hiked. So, as gold is deemed as an inflationary hedge, there can be a demand for it at the right pricing. This may further lead gold prices higher.

Inflows in gold ETFs to also nudge gold prices higher:There is a view that inflation will hamper US growth and result in recessionary pressure and this leads to more of inflows into gold ETFs and hence a higher price for gold by Goldman Sachs by 12 months of $2350 per ounce.

Gold rates in India's retail market

In the country's retail market, gold in Mumbai is retailing for 52,140 for 24K gold, while for 22K gold it is Rs. 47,800. Note the prices are indicative and ex-GST and other levies.

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