The current bullion market is focusing on a combination of factors, including the direction of US interest rates and weakness in the USD, among many other elements, for further guidance, noted a recent report by Emkay Wealth Management.
The direction of US interest rates remains unclear, particularly regarding its likely impact on tariffs and US retail prices. This uncertainty means that one of the major triggers for gold price movement is absent.
Another key factor is the weakness of the US Dollar against other major currencies. This can only happen with a sustained fall in US Dollar yields and interest rates, the report said.
Gold and the US dollar usually share an inverse relationship. When the dollar weakens, gold becomes cheaper for holders of other currencies, boosting demand and often increasing prices, and vice versa.
However, strength in the dollar and firming US bond yields over the last two weeks have added downward pressure on gold prices. The report sees technical support for gold at USD 3,297 and USD 3,248.
“What we need to see is a further fall in the Dollar caused by official rate cuts and a fall in market yields. There is a strong view that with the new budgeted spends to the tune of USD 4.60 trillion, the situation could become murkier because the resultant borrowings may put upward pressure on yields,” Emkay Wealth Management said.
Along with that, a pattern of consolidation is currently being observed in the gold market, which typically leads to an increase in gold prices.
The report further adds that earlier this year, gold prices rose due to buying from China. However, towards the end of April and beginning of May, when China reported a sell-off, that factor became less significant in the bigger picture.
(From ANI)
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