Indian gold rates may rise in October even as US inflation rises to a 30-year high

Personal finance

oh-Kuntala Sarkar


October gold prices began to rise since Thursday this week after a three-month low, and the first week of October was expected to follow that trend. But the US core personal consumer spending (PCE) reports for August came out on Friday, showing a sharp 4.3% rise in inflation. This is their highest inflation rate in 30 years since 1991. Thus, international gold rates will have a strong impact, as this spike in inflation could force US policymakers to maintain the status quo in their monetary policy. This could contribute to further growth in gold prices.

Indian gold rate may rise in October even if US inflation rises to 30-year high

The base PCE is preferred by the US Federal Reserve as they believe it is a more accurate measure of inflation than the CPI. PCE uses “a wider range of products and places greater emphasis on substitution – where consumers buy a cheaper product to replace a more expensive one.” Earlier “dovish” sentiment of US Federal Reserve Chairman Jerome Powell may again be deep. The US target of keeping inflation at 2% in August failed, and this data will prevent them from raising interest rates anytime soon or preventing a large-scale liquidity injection. Thus, the gold price could rise again to around $ 1,780. Investors will again take refuge under the gold. The precious metal is a tool to protect investors from inflation. Gold rates are likely to rise when inflation is higher, stocks or bonds are overvalued. Consequently, gold traders can now think of it as a silver lining, although ordinary buyers will lose.

Last trade prices

Today, on Saturday, the spot market and futures markets are closed. Until yesterday, October 1, gold prices for December Comex futures remained at $ 1,760 an ounce, while spot gold prices at some point even reached $ 1,765 an ounce. October MCX futures gold also rose to Rs. 46,500 yesterday, before the last deal. If this bullish sentiment kicks in again on Monday, the market could cross that range and hit $ 1800 an ounce. According to experts, “the level of $ 1,750 is now support, and $ 1,800 is resistance.” In India, 22 carat gold was quoted at Rs. 45,470 / 10 grams and 24 carats of gold were quoted at Rs. 46 470/10 grams, until yesterday.

Market volatility

However, the Indian gold market will remain quite volatile this month. Although prices are rising now, the situation could change at any moment. Because, apart from the PCE data in the US, traders are worried about the November Fed meeting. In the last week of October, traders will be busy waiting for a cut in the US timeframe. A decline in prices could lower the gold price.

India imports gold from foreign markets, so Indian gold rates are dependent on world prices. If international gold prices rise this month, domestic gold markets will follow the same path. So it will be a good time for Indian jewelers ahead of the holiday season. The Indian Jewelery and Jewelers Association (IBJA) has been trying to keep gold prices high now as gold purchases increase significantly during the holiday seasons. People buy gold mostly for weddings or other auspicious occasions, and low gold rates could doom their business. However, ordinary buyers will put additional pressure on prices.

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Story first published: Saturday 2 October 2021 12:36 PM [IST]

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