Gold prices rose nearly 1% on Wednesday, as the US dollar weakened and investors were waiting for the recent policy meeting of the US Federal Reserve and the upcoming Jackson Hole was waiting for the signs of future interest rates from the Economic Conference. These incidents are expected to throw light on the future direction of interest rates, which is an important factor affecting the gold appeal.
EDT (1711 GMT, ie Indian time at 10:41 pm) at 1:11 pm, Spot Gold rose 0.9% to ₹ 2,78,250 an ounce (about $ 3,345.38 current exchange rates), which had recovered from its lowest level since early August. Similarly, American gold futures rose 0.8% to ₹ 2,81,600 an ounce (about $ 3,388.7). Weak US dollars made gold, which is evaluated in dollars, made more attractive to the holders of other currencies, increasing the demand.
The minutes of the July meeting of the Federal Reserve, which are scheduled to be released to EDT at 2:00 pm, and Fed Chair Jerome Powell’s speech at the Jackson Hole Conference on Friday is at the center of investors’ attention. In July, Fed had decided to keep the interest rates stable, causing disagreement by two central bankers, who wanted to cut rates to support the weakening labor market. These incidents have increased the market expectation for signs of possible rate cuts.
“After the fall in gold prices yesterday, traders are now seeing the opportunity to invest in gold before the Fed minutes,” said RJO Futures’ market strategist Bob Haberkorn. “If the Powell’s stance is soft (dovish), it will be positive to gold, as it does not pay interest. Gold will have to cross ₹ 2,78,500 an ounce to maintain its speed and if the Powell’s stance is dovish, it can re -examine ₹ 2,82,000 per ounces.”
According to the CME Fedwatch Tool, traders are assuming 85% probability of deducting 25 basis points in September meeting. Low interest rates reduce the cost of keeping gold, which does not pay interest, making it more attractive to investment.
Among other precious metals, the spot silver increased by 1% to ₹ 3,135 an ounce (about $ 37.73), while platinum increased by 2% to ₹ 1,10,600 per ounce (about $ 1,331.70). However, the palladium did not change much and it stood at ₹ 9,270 an ounce (approximately $ 1,115.92), which had touched its lowest level since 9 July.
In the respective news, US President Donald Trump on Wednesday demanded the resignation of Fed Governor Lisa Cook, cited by a statement of the head of the US Federal Housing Finance Agency, which requested the Justice Department to investigate the cook. This development has added a layer of uncertainty to the Fede policy’s approach, increasing interest in gold as a safe investment.
Why gold is getting attraction
The recent price activity of gold reflects the role of its rescue against economic uncertainty and currency fluctuations. Weak dollar increases gold ability for international buyers, while low interest rate hopes strengthen its appeal. The Jackson Hole Conference, which is an important event for global central bankers, often determines the expectations of monetary policy, making it an important moment for gold investors.
As the pressure of inflation and geopolitical stress remains, gold remains a favorite property for wealth conservation. Its performance is closely linked to the macroeconmic indicators, especially the Federal Reserve’s interest rates and the power of the US dollar.
Faqs about gold and its market dynamics
Why does a weak US dollar increase gold prices?
Weak US dollar reduces the cost of gold for holders of other currencies, increasing demand. Since gold is evaluated in dollars, gold becomes more economical globally due to a decrease in the price of dollars, which increases its price.
How does interest rates affect gold prices?
Gold does not generate interest or dividends, so when the interest rates are low, the opportunity to keep the gold decreases, making it more attractive than the bonds such as bonds. Conversely, high rates can reduce gold appeal.
What are the risk of investment in gold?
Gold prices can be unstable, affected by macroeconomic factors, currency activities and market spirit. Additionally, gold does not generate income, and can affect storage or transaction cost returns.
How can investors buy gold?
Investors can buy gold through physical forms (rods, coins), gold exchange-traded funds (ETF), mining stock, or futures contracts. Each option has different risks, costs and liquidity levels, so research is necessary.
What is CME Fedwatch Tool, and how is it related to gold?
The CME Fedwatch tool tracks the market expectations for the interest rate decisions of Federal Reserve based on futures prices. The high probability of rate deduction, as indicated by the tool, often supports gold prices due to low opportunity costs.
How do geopolitical events affect gold prices?
Geophysical stress, such as business disputes or political instability, increase gold demand as a safe investment, which often increases prices in search of investor stability.
Looking Ahead
As the minutes of the Federal Reserve and Powell’s Jackson Hole speeches are approaching, gold investors are ready for potential market-affected events. A dovish signal can raise gold prices towards ₹ 2,82,000 an ounce, while a rigid stance may reduce the faster. Focusing on dollar dynamics and global economic conditions, the role of gold as a safe investment of gold remains significant for investors navigating in an uncertain scenario.
