Informist, Tuesday, Jun 1, 2021

By Roshni Devi and Sayantan Sarkar

MUMBAI - Rising inflation in the US and mixed economic data are likely to keep gold prices firm this month.

Informist polled 10 traders and analysts, of which most expect a bullish trend in the prices of the precious metal. The average forecast for gold futures was at 48,000-51,500 rupees per 10 gm on the Multi Commodity Exchange of India, and at $1,880-$1,970 an ounce on COMEX.

Currently, the most-active August contract was around 49,649 rupees per 10 gm on MCX and at $1,911 an ounce on COMEX.

Earlier today, the most-active contract on MCX hit a 17-week high of 49,721 rupees per 10 gm, while on COMEX, it hit a 20-week high of $1,916.9 per ounce.

Core inflation for June, at 3.1%, also beat the estimate of 2.9% and Federal Reserve's target of 2%. Gold is used as a hedge against rising inflation. 

Data released by the US Commerce Department on Friday showed that consumer prices rose 0.7% in April, higher than the expectation of 0.6%.

Gold is likely to get more support from continuous monetary and fiscal stimulus measures by governments and central banks around the world.

"The price is looking bullish because of massive amount of fiscal spending, which helped economic recovery faster than expected. Also, Fed keeping their monetary policy extremely dovish will fuel prices of the commodity," said Kshitij Purohit, lead of commodities and currency at CapitalVia Global Research.

However, gold may face headwinds amid talks of the US Federal Reserve scaling back some of its bond purchases in the coming months, due to the rising inflation.

"A discussion within the Fed has only just begun about when to consider withdrawing the bond purchases. It will therefore, take some time before this actually happens, let alone before any first rake hike is implemented," Carsten Fritsch, analyst at Commerzbank AG, said in a report.

With several countries in Europe reopening economies, industrial and social activities are likely to rise, further dulling gold's appeal as a safe-haven asset.

Some consolidation in prices is also likely this month, after they rose sharply due to the dollar's weakness and a fall in US treasury yields, analysts said.

In India, physical demand for gold has fallen drastically due to COVID-19 and high prices. "The intensity of the second wave, particularly in metros/cities, and its rapid spread across states, regions and pockets of rural India, has impacted demand," said Mukesh Kumar, senior analyst – India at World Gold Council, in a note.

Many states have imposed near-lockdown restrictions and even extended them. Nearly all private establishments remain shut.

"There is no movement in the market as of now," said Haresh Acharya, a Gujarat-based bullion importer. "Even a partial or gradual reopening will be of no use now because this is the off-season (Jun-Jul) when there aren't many marriages or auspicious days."

The following is a summary of the poll by Informist on gold prices in June and details of estimates by respondents, in alphabetical order:

End

US$1 = 72.90 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Nidhi Chugh

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