Wednesday, January 25, 2023

Due to the weak dollar and concerns about the US economy, gold reaches Rs 57000/10g for the first time

Gold hits Rs 57000/10g 1st time on weak $, US recession fears

 

MUMBAI: On Tuesday, gold prices in India reached an all-time high of Rs 57,300 per 10 grams due to a 20% increase in the international rate over the course of three months. The yellow metal's inverse relationship with the dollar contributed to the rise, which was aided by the dollar's weakness.


Gold prices broke above Rs 57,000 per 10 grams on Tuesday, both on the Multi Commodities Exchange (MCX) and in physical markets. Furthermore, analysts anticipate that gold will soon surpass the Rs 60k mark in light of both global and local conditions. Industry participants stated that wedding season demand is also supporting the rally.


Since the US Federal Reserve began its rate-hiking spree, the dollar has risen against most major currencies. Gold prices fell as a result of this. Consequently, it plummeted to a low of $1,636 by the beginning of October after reaching a high of roughly $1,950 per ounce in early March in 2022. The gold began its upward trend as well as the rumors of a slowdown in the Fed's decision-making regarding rate hikes. The decline of the dollar was accompanied by this.


According to Colin Shah, the MD of Kama Jewelry, "the weakness in the dollar" is the primary reason for the rise in the yellow metal. The US Federal Reserve gave hints that this cycle would see a slower rate increase or, at most, a 25-basis-point (100 bps) increase. "As the pressure on the dollar rises, the fear of a recession in the West is also giving gold strength," Shah stated.


After falling below Rs 50,000 in October and November 2022, the price of the yellow metal is rising in the local market as well. Domestic gold prices were more resilient during this time, especially because of the sharp depreciation of the rupee, which fell by more than 10 percent in 2022, according to a Kotak Securities report.


Capture Analysts anticipate a rise in the price of gold, which is regarded as a hedge during economic downturns, in light of rumors of a recession in the United States and Europe. Ravindra Rao of Kotak Securities claims that gold prices have risen during five of the seven US recessions since 1973. "Rao stated that gold might finally experience the recession it required to shine in 2023.


According to research conducted by the World Gold Council, the yellow metal has consistently outperformed other asset classes during times of stagflation. "Despite regional differences, a period of stagflation is a reasonable scenario for the first half of 2023," the Kotak Securities report added.


Gold is expected to surpass its all-time high of $2,078 on the global market. Rao wants the price to be between Rs 60,000 and Rs 62,000 in the domestic market by 2023. Rao, on the other hand, stated that "the target price could be achieved earlier during the first half of 2023" in the event that "inflation continues to slow and the US Fed takes a pause in its rate hike spree."

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