Gold price today trading close to fresh high; here’s what is driving rally in yellow metal

Gold price today trading close to fresh high; here’s what is driving rally in yellow metal

Gold prices are trading near all-time highs after touching fresh peaks in trade on Tuesday. MCX Gold scaled the Rs 61,000/10 grams mark to reach a record high of approximately Rs 61,145/10 grams and is trading at around Rs 61,130/ 10 grams on Wednesday. Gold also crossed the $2000 per troy ounce mark in the COMEX index as well.Gold price touches fresh highs

The yellow metal settled at Rs 60,984, higher by 1.62%, or 970 rupees after soaring in the evening session. Additionally, silver futures climbed to around Rs 74,700/kg, its second-highest point ever, before settling at Rs 74,650/kg, reflecting a 3.57% gain. 

Weaker Dollar

“The primary reasons for the rally in the precious metals are the softening dollar index. The Dollar Index has fallen to a 2-month low as there is a widening belief that the Fed may not only pause but start slashing rates by the end of 2023. Being a safe haven, and often attracts investors’ interest in times of uncertainty and slowdown, low rates,” said Colin Shah, MD, Kama Jewelry.

Banking Crisis

“JP Morgan Chase CEO gave a warning that the banking crisis is not over. Investors fled to the safety of gold after comments from JP Morgan Chase CEO and weak US data. For the rally to continue on the upside, the service sector also needs to slow down which will give confirmation of recession and the US Fed will then have to start cutting rates,” said Bhavik Patel, Senior Currency and Commodities Analyst, Tradebulls Securities.

Federal Reserve

Excerpts state that a convergence of all the factors: a cooling job market, a weakening dollar and the hope of the Federal Reserve to start slashing rates will continue to fuel the rally in gold. Manav Modi believed that markets are factoring in a 43% chance of the Federal Reserve hiking rates by a quarter basis point in May, with a roughly 57% chance of a pause. Bhavik Patel added that with the weakening data emerging from the US, a rate cut is being priced in for the September meeting.

Outlook for gold

“We would advocate intraday going long near 60,800 for expected target of 61,300 and stoploss of 60,500. Any leveraged position should be avoided and stoploss should be kept as gold is now in an overbought zone so caution is needed for any positional trades,” said Bhavik Patel.