Informist, Friday, Feb 4, 2022
By Chinmay Mungse and Sayantan Sarkar
MUMBAI – The rise in dollar and US bond yields after the Federal Reserve's indication that there may be multiple rate hikes this year, are expected to take the sheen off gold prices in February.
The US Fed had in January indicated its willingness to hike interest rates as early as March to rein in the rising inflation in the country. Though the market had anticipated the decision, Fed Chair Jerome Powell's comments that the central bank is likely to be flexible and can hike interest rates more than thrice, surprised investors.
"Powell's statement caught investors off-guard and dampened the market sentiments for the precious metal," said Sriram Iyer, senior analyst at Reliance Securities.
Gold prices tend to suffer when interest rates are higher as it reduces liquidity in the market, and thereby curtails investment demand for the yellow metal.
A majority of the analysts polled by Informist expect gold prices to fall in the month ahead with major triggers being the rise in the dollar index and US bond yields.
The average of forecasts of the poll participants pegs futures contracts of the yellow metal at 47,506-48,744 rupees per 10 gm on the Multi Commodity Exchange of India. On the COMEX, gold is seen at $1,760-$1,846 an ounce.
Currently, the most-active February contract on the MCX is at 47,955 rupees per 10 gm and the February futures on the COMEX at $1,807.30 an ounce.
The non-farm payroll data is expected to show a drop in employment numbers, which may provide some respite for prices, according to experts.
As February trading is underway, once again the $1,800 per ounce level on COMEX appears to be an important threshold and may cause some additional fireworks with price volatility in the coming days and weeks, Robert Petrucci, author at Dailyforex.com said in a report.
Higher inflation in the US is expected to keep the downside to bullion prices capped. The personal consumption expenditure index data showed US inflation at 5.8% in 2021, the highest increase in 40 years.
Last week, the World Gold Council had said investment demand for gold might suffer this year due to a rise in interest rates and robust demand for bars and coins. However, persistent high inflation and pullbacks in equity markets might be supportive.
"Consumer-driven demand should benefit from a weaker price environment with good underlying economic growth," WGC said in its Gold Demand Trends report for Oct-Dec.
Investors will also monitor the situation in eastern Europe, where Ukraine and Russia are locked in an eyeball-to-eyeball confrontation. An escalation in tension may boost the safe-haven appeal of gold. Russia has also blamed the US for luring it into a conflict and ignoring Kremlin's security concerns about Ukraine.
Following is a summary of the poll by Informist on gold prices in February and details of estimates by respondents, in alphabetical order:
| ANALYSTS/TRADERS | DOMESTIC PRICE | INTERNATIONAL PRICE |
| (rupees per 10 gm) | ($ per ounce) | |
| ABans Group | 46,600-49,400 | 1,753-1,855 |
| DailyForex.com | - | 1,743-1,876 |
| Finlit Consulting Pvt Ltd | 47,200-49,000 | 1,780-1,860 |
| HDFC Securities | 46,800-49,000 | 1,740-1,850 |
| Kedia Comtrade | 47,400-47,900 | 1,782-1,806 |
| Kotak Securities | 47,000-49,000 | 1,750-1,850 |
| Motilal Oswal Commodity Broking | 46,800-48,400 | 1,790-1,840 |
| Prthvi Finmart | 47,200-48,300 | 1,750-1,830 |
| Reliance Securities | 47,500-48,700 | 1,750-1,850 |
| Umedmal Tilokchand Zaveri | 47,000-49,000 | 1.770-1,830 |
End
US$1 = 74.69 rupees
Edited by Michael Correya
Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2022. All rights reserved.
