Gold prices saw a flat movement on November 15, but for the week they are down 4% , its worst week in three years. One of the major trigger’s for the correction in gold prices is the strong US dollar. Spot gold rose to $2,569.69 per ounce, an uptick of 0.1 per cent after five sessions.
The US dollar rally continues following Donald Trump’s victory in the elections taking the sheen off Gold. A typically safe haven buy, investors are now alternatives given the Fed rate cuts and the dollar’s strength. The inflation data in US and Fed comments on a pause possibility to rein in inflation is also exerting pressure on the gold rates.
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Jateen Trivedi, VP Research Analyst – Commodity and Currency of LKP Securities, said,”Gold’s weakness persisted with price falling below 2550$ and near 73500rs in MCX as the dollar climbed above 106.50 and edged closer to 107. The US CPI data, which came in higher at 2.6% compared to the expected 2.4%, fueled the dollar’s strength. While the Fed has been continuing with rate cuts as inflation approached its 2% target, the higher-than-expected CPI reading raises concerns that further cuts may be paused. This development added pressure on gold prices, which reacted negatively to the stronger dollar and the potential shift in Fed policy.”
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Fed Chair Jerome Powell said on Thursday steady economic growth, a strong job market, and persistent inflation justify caution in cutting rates quickly. “While Powell’s comments could cap gains for gold as we head into the new year, another turbulent term for President Trump could also see it attract safe-haven flows,” said Matt Simpson, senior analyst at City Index. Investors are awaiting U.S. retail sales data, and comments from several Fed officials later in the day.
(With Reuters Inputs)
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