Gold rate today: Will US Fed rate hike fear spoil festival rally?

According to commodity market experts, US Federal Reserve has kept the interest rate unchanged but it has raised the median rates from 4.60 per cent to 5.10 per cent, triggering lower chances of rate cut in short to medium term. This has helped US dollar to gain strength against major global currencies. In fact, dollar index has climbed to six-month high whereas US dollar has hit 11-month high against Indian National Rupee (INR). They said that gold prices are expected to remain range-bound in near term as US Fed has already declared that it would be increasing interest rate one more time in 2023. However, they said that one should maintain buy on dips as chances of downside in gold and silver prices are limited and underperformance in China may bottom out and metal prices may pick up momentum ahead of festival season in India.

US dollar to INR

Speaking on the reasons that put gold prices under pressure, Anuj Gupta, Head — Commodity and Currency at HDFC Securities said, “Gold prices came under pressure after renewed fear of US Fed rate hike last week. This lifted the US dollar index to six month high whereas the US dollar hit 11-month high against Indian rupee. This is happening becuase bond yield in the US has gone higher and people are relocating their money into currencies and bonds. This has put gold and other assets under pressure.”

US Fed rate hike in focus

Pointing towards hawkish stance of the US Federal Reserve on interest rate hike, Amit Sajeja, Vice President — Research at Motilal Oswal said, “Even though, US Fed decided to maintain pause on interest rates, it has raised median rates from 4.60 per cent to 5.10 per cent. This has triggered speculation about not possible rate cut in near to medium term. This has sparked buying in the US dollar as the American currency is expected to gain in the wake of hawkish US Fed.”

Amit Sajeja of Motilal Oswal said that US Fed has already announced that there will one more rate hike coming by the end of 2023. So, market has started discounting on the possible rate hike. However, he maintained that downside movement in gold and silver prices are limited and advised investors to maintain ‘buy on dips’ strategy.

Gold price target

“Gold prices in international market is expected to trade in $1,880 to $1,980 per ounce range whereas on MCX, the precious metal may trade in ₹58,000 to ₹60,500 per 10 gm range,” said Amit Sajeja.

On near term range, Anuj Gupta of HDFC Securities said, “Gold prices have immediate support placed at $1,920 whereas its crucial near term support is placed at $1,905 per ounce levels. On MCX, gold rates today have immediate support placed at ₹58,650 to ₹58,700 levels whereas it has crucial support placed at ₹58,100 to ₹58,000 levels. On upper side, spot gold price is facing resistance at $1,955 whereas it is facing major hurdle at $1,980 levels. On MCX, ₹59,800 and ₹60,500 are immediate and major resistance for the yellow metal.”

Strategy for festival season

On whether renewed fear of US Fed rate hike will spoil the expected festival rally in gold prices, Anuj Gupta of HDFC Securities said, “Downward trend in gold prices are limited. If the gold prices in India breaches its current support of ₹58,650 then rs 58,200 to ₹58,000 would be a good supply zone ahead of the festival season for short term target of ₹60,500 per 10 gm.” However, he advised investors to maintain strict stop loss at ₹57,500 levels while taking position in gold ahead of the festival season.

Echoing with Anuj Gupta’s views, Amit Sajeja of Motilal Oswal said that demand for phycisal gold and gold ETF in Indian is still intact in Indian, which signals possible bounce back in near term.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 23 Sep 2023, 11:56 AM IST