Highlights of Record High Gold Prices:
- Indian gold futures hit a record high, surpassing the previous record of Rs.56,191 in August 2020.
- Gold rates have rallied since November due to a weaker dollar and expectations of slower interest rate hikes by the U.S. Federal Reserve.
- The price rise has dampened demand in India, the world’s second biggest consumer of gold.
- Data released on Thursday showed that U.S consumer prices fell for the first time in more than two years in December, offering hope that inflation will soften going forward.
- The bulls might now target the next resistance near $1920/oz and support is pegged near $1870/oz.
- Gold prices are set for a fourth straight week of gains after the U.S. inflation report came in line with market expectations, but whether or not the metal can maintain the upward momentum depends on the rate hike decision by the Federal Reserve in its February meeting.
Details of Record High Gold Prices:
Gold futures in India reached a new record high, following an upward trend in international markets. The Gold price per 10 grams increased to Rs.56,245, surpassing the previous record of Rs.56,191 set in August 2020. The rally in gold rates is attributed to a weaker dollar and expectations of slower interest rate hikes by the U.S. Federal Reserve. However, the increase in price has led to a decrease in demand for the precious metal in India, as reported by dealers.
Data made available on Thursday indicated that consumer prices in the U.S decreased for the first time in over two years in December, providing optimism that inflation may decrease in the future. The Federal Reserve had increased rates by 75 basis points four times in the previous year, before slowing down to a 50 basis point increase in December.
“The primary reason for the increase in gold prices was the US CPI, which came in as expected. According to the report, US CPI increased by 6.5% in December compared to 7.1% in November (Y-o-Y). This is the lowest it has been since October 2021. A decrease in inflation leads to less aggressive interest rate hikes by the Fed. According to the CME Fed watch tool, the likelihood of a 25-bps hike in the February FOMC meeting has risen to 92.7%. This has contributed to gold prices trading above the resistance level of $1884/oz, which is the 8-month high,” said Ravindra V. Rao, Head of Commodity Research at Kotak Securities Ltd.
“The market may now aim for the next resistance level of around $1920/oz. The current support level is around $1870/oz. A break below $1870/oz during closing may indicate a false breakout,” he added.
In the spot market, the price of spot gold remained unchanged at $1,895.82 per ounce, on a trajectory for its fourth consecutive week of gains.
“Gold prices are poised to continue their upward trend for a fourth consecutive week, following the release of the U.S. inflation report which met market expectations, though it is still considered to be on the high side. The ability for the metal to sustain this momentum will depend on the interest rate hike decision made by the Federal Reserve in its February meeting,” stated Rahul Kalantri, Vice President of Commodities at Mehta Equities Ltd.
Spot silver decreased by 0.4% to $23.69. “Silver has support levels at $23.52-23.35 and resistance levels at $23.95-24.15. In terms of Indian rupees, gold has support levels at ₹55,540-55,380 and resistance levels at Rs.56,120, 56,350. Silver has support levels at Rs.68,050-67,520 and resistance levels at Rs.69,320-69,680,” added Rahul Kalantri.
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