October 17, 2024
New Delhi, India
Gold prices
Gold prices continued their upward momentum on Thursday, October 17, with XAU/USD marking its third consecutive day of gains and hitting fresh all-time highs as investors flocked to safe-haven assets. The domestic futures market also saw MCX Gold for December 5 expiry rise 0.21% to ₹76,822 per 10 grams during the morning session, driven by a combination of positive global cues and lower US Treasury yields.
Key Drivers of Gold’s Rally:
- Geopolitical Tensions: Heightened tensions in the Middle East—including Israel’s aggression over Hezbollah and the risk of further escalation involving Iran—are fueling safe-haven demand for gold. Recent reports suggest Israel is preparing to respond to an October 1 attack from Iran, increasing the likelihood of a broader conflict.
- Weakening Treasury Yields: A fall in US Treasury yields is providing further support to gold prices, making the non-yielding yellow metal more attractive to investors. This follows inflation data from Europe and the UK that has prompted expectations of aggressive rate cuts by the European Central Bank (ECB) and the Bank of England (BoE).
- Expected Rate Cuts: The Federal Reserve (Fed) is widely expected to cut interest rates by 25 basis points (bps) in November, with the CME FedWatch Tool showing a 92.2% chance of such a cut. Rate cuts typically boost demand for gold, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Global Market Influence:
- Record Gold Prices in International Markets: Gold prices are nearing record levels in international markets, supported by both the escalating Middle East conflict and lower crude oil prices. Declining oil prices may ease inflationary pressures, providing more room for central banks to cut rates.
- US Economic Data in Focus: Investors are watching for US Retail Sales, Weekly Initial Jobless Claims, and the Philly Fed Manufacturing Index for clues on the Fed’s rate reduction trajectory. A drop in US import prices in September—the largest in nine months—also suggests that inflation remains under control, reinforcing expectations of further rate cuts.
Also Read: USDINR Today: Rupee Faces Mild Losses on Stronger US Dollar and Foreign Fund Outflows
Gold’s Long-Term Outlook:
Gold’s long-term outlook remains bullish, with geopolitical risks and macroeconomic uncertainty bolstering the metal’s safe-haven appeal. Despite a strong US Dollar, which has been trading near its highest level since August, investors continue to flock to gold amid expectations of monetary easing and fears of a broader conflict in the Middle East.
Disclaimer:
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