The gold price opened at Rs 66100 per 10 grams after the US Federal Reserve decided to keep interest rates between 5.25 and 5.5 percent. As trading began on Thursday, prices for gold rose to a record high of Rs 66 778 per 10 gram on the Multi Commodity Exchange futures expiring in April 2024.
Spot Gold prices reached a new record as bond yields and the US dollar declined. This was largely due to Federal Reserve Chair Jerome Powell reaffirming three possible rate cuts this year. Lower interest rates lower the opportunity costs of holding assets that do not yield, such as gold. This puts pressure on the US dollar.
Spot Gold increased by 2.07 per cent to $2,205.80 an ounce. It had previously reached a record high of $2222.39. Silver also saw a 2.83 percent increase to $25,815 an ounce.
Kyle Rodda, financial market analyst, described the current situation as “a goldilocks scenario”, where slightly higher expectations of inflation align with lower nominal interest rates, leading to reduced real yields. The gold market has been buoyed by the Fed’s dovish position, coupled with short-term pressures, momentum and other factors.
Tim Waterer of KCM Trade noted that Powell’s hint of possible three rate cuts in this year, as well as the declines of bond yields and US dollar has led to higher prices.
The US dollar has weakened against other currencies, and the dollar index is trading at a low of 102.90 (down 0.11 percent) for a week. The benchmark US 10-year Treasury rates also fell.
The Fed’s dovish position and the market dynamics that favor precious metals are driving these developments.