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Gold prices fell in India on Wednesday, according to data from India’s Multi Commodity Exchange (MCX).
Gold price stood at 61,817 Indian Rupees (INR) per 10 grams, down INR 616 compared with the INR 62,433 it cost on Tuesday.
As for futures contracts, Gold prices decreased to INR 61,893 per 10 gms from INR 62,015 per 10 gms.
Prices for Silver futures contracts decreased to INR 71,700 per kg from INR 72,093 per kg.
Major Indian city
Gold Price
Ahmedabad
63,975
Mumbai
63,850
New Delhi
63,915
Chennai
63,980
Kolkata
64,020
Federal Reserve (Fed) Governor Christopher Waller’s remarks on Tuesday further tempered expectations for a March rate cut and act as a headwind for the non-yielding Comex Gold price.
Waller added that the Fed needs to be cautious and cannot rush into rate cuts as the economy remains in good shape, pushing the US Treasury bond yields sharply higher.
The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, underpinning the US Dollar and capping the non-yielding yellow metal.
The risk of a further escalation of tensions in the Middle East does little to provide any respite to the safe-haven XAU/USD or impress bullish traders.
In the latest development, the US carried out another airstrike targeting a Houthi missile facility in Yemen, noting a threat to merchant vessels and US Navy ships.
The official data released by the National Bureau of Statistics (NBS) showed that China’s economy grew at an annual rate of 5.2% in the final quarter of 2023.
On a quarterly basis, Chinese GDP expanded by 1.0% in Q3 vs. 1.0% expected, while December Retail Sales and Industrial Production rose by 7.4% YoY and 6.8% YoY, respectively.
Following the release of the high-impact data, the NBS noted that China’s economy faces a complex external environment and low consumer prices reflect insufficient domestic demand.
The geopolitical risks, along with China’s economic woes, might hold back traders from placing aggressive bearish bets around the metal and help limit any further losses.
Traders now look to the US macro data, which is expected to show that monthly Retail Sales grew by 0.4% in December and Industrial Production remained flat.
Apart from this, scheduled speeches by Fed Governors Michael Barr and Michelle Bowman might influence the USD and provide some impetus to the commodity.
(An automation tool was used in creating this post.)
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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