Gold prices in India once again rallied over the weekend, taking cues from the international markets. Remember, India imports its gold requirements and if global prices are up, they mirror the trend in India.
Gold prices in the international markets began a rally yesterday as the US labor department released the employment data for August. October gold futures price shows early gains and hits a four-week high level at $1831.40/oz with a $11.00 hike on Friday, while the market went technically bullish weekly high. Comex gold was up by 1.23% and was quoted at $1833.7s. In line with the trend, the gold spot was last traded at $1828.60/oz with a considerable hike of 0.99% till yesterday, when the spot market was open.
Economic reality check in the US
Gold futures and spot gold prices in the international markets are gaining because of yesterday's reality check of the US's economy. In August 235,000 jobs were created that missed expectations of 720,000 odd. So it was anticipated that the economy is not recovering at the expected pace. On the other hand, a major downbeat was the service sector, as the Institute for Supply Management (ISM) revealed its "non-manufacturing index showed a reading of 61.7% for August, down from July's reading of 64.1%. According to consensus estimates, economists were forecasting a reading around 61.9%." Additionally, the Business Activities Index dropped to 60.7% which is down from July's data of 67, while the Prices Index fell to 75.4%, down from July's figure at 82.3%. The New Orders Index too fell to 63.2%, which is down from the previous data of 63.7%. On the other hand, inflation pressure fell marginally from its elevated levels.
The US Fed Chairman Jerome Powell was already dovish about interest rate hike soon, and also indicated a delayed tapering at the end of this year. However, this detailed data proves his point of being doubtful about the economic recovery so soon. So, this employment data coupled with the non-manufacturing index will restrict the Fed to hike interest rates, helping the gold prices to gain high in the international markets.
As the Covid-19 delta variant sweeps through the nation, it slowed down the economic activities again in the country. However, this slowdown could be temporary according to some economists, as the pandemic will take a step back, both the manufacturing and service sectors will boom. Commenting on that, Katherine Judge, senior economist at CIBC, "Combined with the disappointing jobs report for August, this report also favors a slower pace to H2 2021 GDP growth than our previous forecast taking into account the impact of the Delta variant spread. However, this will be only a temporary detour, and we look for a re-acceleration in growth next spring as the Delta wave will then be behind us."