Informist, Wednesday, Jan 6, 2022
By Chinmay Mungse and Sayantan Sarkar
MUMBAI – Rising fears of fresh worldwide lockdowns to curb the spread of the new Omicron variant of COVID-19 may keep the shine on gold prices in January even as the US Federal Reserve moves towards an interest rate hike soon.
Omicron, the most transmissible COVID-19 variant till date, has run rampant in the US, Europe, Australia and other major economies around the world. New cases have risen exponentially and governments have been forced to re-introduce restrictions to curb the spread.
"If the (Omicron) cases rise significantly, then the Fed might take a back foot in increasing interest rates," said Ravindra Rao, head of research at Kotak Securities.
Majority of the analysts polled by Informist expect gold prices to trend with a positive bias during the month as the Omicron variant's negative impact on the global economy is expected to boost the safe-haven appeal of the precious metal.
The average of forecasts of the poll participants pegs futures contracts of the yellow metal at 46,722-48,987 rupees per 10 gm on the Multi Commodity Exchange of India. On the COMEX, gold is seen at $1,750-$1,867 an ounce.
Currently, the most-active February contract on the MCX is at 47,640 rupees per 10 gm and the February futures on the COMEX at $1,803.1 an ounce.
The minutes from the latest meeting of the US Fed revealed that members may increase interest rates as soon as March to combat rising inflation in the country.
"Fund managers frequently use gold as a hedge against the unexpected, whether it be macroeconomic or geopolitical developments, and we must pay close attention to what the US Federal Open Market Committee does, rather than what it says, since that will have the most influence," said Kshitij Purohit, lead commodities and currencies, CapitalVia Global Research Ltd.
Record cases of COVID-19 and doubling of infections strain medical systems, which challenge the earlier optimism backed by global studies suggesting that Omicron is less severe. This is expected to play a major role in the US Fed's next policy meeting as any substantial impact on the country's economy may prompt the central bank to postpone its interest rate-hike plans.
Meanwhile, data showed that non-farm private sector employment in the US rose by 807,000 in December, the highest in seven months. The dollar, however, failed to consolidate after the release of the robust data and is currently trading flat.
"Given the fact that traders are nervous about the Fed’s hawkish monetary policy stance, it is possible that the current risk-off mode may force traders to hedge their risk by buying gold," Naeem Aslam, chief market analyst at Avatrade, said in a report.
Following is a summary of the poll by Informist on gold prices in January and details of estimates by respondents, in alphabetical order:
| ANALYSTS/TRADERS | DOMESTIC PRICE | INTERNATIONAL PRICE |
| (rupees per 10 gm) | ($ per ounce) | |
| ABans Group | 46,102-49,636 | 1,748-1,882 |
| CapitalVia Global Research Ltd | 45,500-49,500 | 1,720-1,880 |
| Emkay Global | 47,000-48,200 | 1,760-1,865 |
| Finlit Consulting Pvt Ltd | 47,000-48,600 | 1,790-1,850 |
| FX Empire.com | - | 1,757-1,881 |
| Geojit Financial Services | 45,900-49,650 | 1,700-1,920 |
| Kedia Comtrade | 47,400-48,500 | 1,745-1,844 |
| Kotak Securities | 47,300-48,800 | 1,760-1,830 |
| Motilal Oswal Commodity Broking | 46,800-49,500 | 1,770-1,871 |
| Reliance Securities | 47,500-48,500 | 1,750-1,850 |
End
US$1 = 74.38 rupees
Edited by Vidhi Verma
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