Gold prices continued their bullish trend for the third consecutive day on Friday, September 18, as a recent decline in crude oil prices supported the bullion rally, while limited gains in the US dollar and a drop in global bond yields also aided sentiment.
MCX gold for October delivery advanced another ₹1,620 per 10 grams to hit a day’s high of ₹1,54,600, taking its three-day cumulative gain to ₹3,791. The rally has also put bullion on track to post its second consecutive weekly gain.
The recent gains have narrowed gold’s September losses to just 0.27%. The precious metal has also recovered ₹4,335 from its monthly low of ₹1,49,665, highlighting the strength of the recent rebound.
The yellow metal had initially reacted negatively to the US Federal Reserve’s 25-basis-point rate hike on Wednesday, with policymakers signalling the possibility of further tightening. However, gold subsequently found relief from falling oil prices, which triggered renewed hopes that inflation could remain under control.
Gold prices have also drawn support from the limited rise in the US Dollar Index following the Fed’s policy tightening. However, the index continues to hover near a seven-week high, with the US dollar trading around 100.2 against a basket of currencies.
A stronger dollar generally makes the yellow metal more expensive for holders of other currencies, which can weigh on demand.
Although gold is traditionally viewed as a hedge against inflation, higher rates can curb its demand by increasing the appeal of yield-bearing assets.
While the recent rebound has strengthened gold’s momentum, analysts remain cautious about chasing prices at current levels, pointing to continued uncertainty around global interest rates and bond yields.
Is the latest gold rebound a cue to buy or wait?
Vikram Subburaj, CEO, Giottus.com, said the important point for Indian investors is that the recent correction has been followed by a strong recovery, but volatility is still elevated.
The Fed raised its policy rate to 3.75%-4.00% on September 16, and expectations of another hike remain in focus. At the same time, the US 10-year Treasury yield remains close to 5%, while Brent crude is above $100 a barrel. These factors can quickly change the direction of bullion.
Subburaj said domestic prices will also depend on the rupee. A weaker rupee can cushion a fall in international gold and silver, while a stronger rupee can limit gains on MCX.
Investors should therefore avoid treating the latest rebound as a signal to chase prices, Subburaj said. For long-term allocations, staggered buying can help manage volatility. Traders using leverage should reduce position sizes and maintain strict stop-losses until the global rate and yield outlook becomes clearer, he added.
What could shape the next move in gold prices?
Pinky Yadav, commodity fundamental analyst at Choice Broking, said, “Bullion prices gained support as falling crude oil prices relieved inflation pressures, driving bond yields lower. China bolstered sentiment by increasing gold reserves while paring U.S. Treasury holdings. Investors remain focused on Middle East developments and central bank policies as key drivers for precious metals.”
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 making any investment decisions.
