NEW DELHI: Gold prices jumped on Thursday after the US Federal Reserve policymakers cut the GDP forecast for the world’s largest economy and suggested US inflation at 4.3 per cent for 2022 while raising interest rate for the first time since 2018.
Gold futures on MCX for April delivery were trading at Rs 51,678 per 10 grams, up Rs 458 or 0.90 per cent. But analysts expected gold to fall going ahead as the bullion is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.8 per cent to 1,070.53 tonnes on Wednesday – its highest since March 2021
Silver futures for May delivery were trading Rs 1170 or 1.74 per cent higher at Rs 67,699 per kg.
The US central bank hinted at six rate hikes in 2022 even as Chair Jerome Powell suggested the ‘economy is very strong’ to handle tighter policy and the probability of a recession is “not particularly elevated.”
The Fed projected inflation at 4.3 per cent, far above its comfort level of 2 per cent, and trimmed growth forecast to 2.8 per cent from 4 per cent.
Trading strategy
ICICI Securities believes that gold is likely to maintain its recent negative bias amid a firm dollar and surge in US treasury yields.
“Yields are rising as the Fed said they would raise their benchmark interest rate by 25 bps to a range between 0.25 per cent and 0.5 per cent from near zero. Further, the Fed also signalled it could soon announce and implement a plan to shrink its $9 trillion asset portfolio. As per FOMC economic projections, officials expect Fed rate to rise to at least 1.9 per cent by the end of this year, implying total of seven quarter-percentage-point increases,” it said.
This brokerage sees resistance for gold at Rs 51,720 while it sees resistance for silver at Rs 67,972.
Global markets
Spot gold held its ground at $1,929.57 per ounce after touching its lowest since February 28 at $1,894.70 on Wednesday. US gold futures rose 1 per cent to $1,928.40, Reuters reported.
Spot silver was up 0.3 per cent at $25.13 per ounce, while platinum rose 0.7 per cent to $1,024.32.