Gold prices poised for largest weekly decline in nearly eight months: Factors behind the downturn

Services

FNO Stocks with CA Abhay

Stock Market Masterclass

Option Trading with CA Abhay

Equity Investment with CA Abhay

Equity Trading with CA Abhay

Gold prices poised for largest weekly decline in nearly eight months: Factors behind the downturn

Team FS

24/May/2024

Key Points:

Gold prices plummet to a two-week low, marking their most significant weekly decline in nearly eight months, driven by a surge in Treasury yields and a strong dollar.
The recent downturn in gold prices is attributed to diminishing expectations for a US Federal Reserve interest rate cut following a hawkish tone in the minutes from May’s policy meeting.
Despite short-term pressures, gold retains support from Chinese reserve buying and ongoing geopolitical tensions, with analysts suggesting potential price support at lower levels.

Gold prices experienced a notable downturn on Friday, reaching a two-week low and recording their most substantial weekly decline in almost eight months. The decline, highlighted by a Reuters report, underscores the impact of recent developments in the US Federal Reserve's monetary policy stance on the precious metal market.

Diminishing Expectations for Interest Rate Cuts
The decline in gold prices is primarily attributed to diminishing expectations for an interest rate cut from the US Federal Reserve. The minutes from May’s policy meeting revealed a hawkish tone, signaling policymakers' reluctance to confidently consider rate cuts. This sentiment has driven up Treasury yields and the dollar, exerting downward pressure on gold prices.

Factors Influencing Gold Prices
Despite the short-term pressures on gold prices, the precious metal continues to receive support from Chinese reserve buying and ongoing geopolitical tensions. The People’s Bank of China remains a significant source of demand for gold, although the pace of uptake slowed in April compared to previous months. Additionally, ongoing geopolitical tensions contribute to the appeal of gold as a safe-haven asset.

Analysts’ Perspectives and Price Outlook
Analysts suggest that while gold prices have retreated from recent highs, strong demand from global central banks and ongoing geopolitical tensions could provide support at lower levels. Rahul Kalantri, VP Commodities at Mehta Equities, notes that the recent selloff in gold prices was triggered by the release of Federal Open Market Committee (FOMC) meeting minutes. However, he remains optimistic about the potential for price support amidst prevailing market dynamics.

Navneet Damani, Senior VP of Commodity Research at Motilal Oswal Financial Services, highlights the ambiguity surrounding Fed interest rate cuts and geopolitical tensions as factors influencing gold prices. Looking ahead, gold faces support at specific price levels in both dollar and rupee terms, indicating potential price ranges for investors to monitor.

Conclusion: Assessing Gold’s Market Dynamics
The recent decline in gold prices amidst hawkish Federal Reserve sentiments underscores the intricacies of the precious metal market and its sensitivity to monetary policy developments. While short-term pressures weigh on prices, gold retains its appeal as a safe-haven asset amid ongoing geopolitical uncertainties. Investors are advised to monitor key price levels and remain vigilant amidst evolving market dynamics to capitalize on potential opportunities in the gold market.

Also Read : JSW Infrastructure Limited and A.P. Møller Capital Sign Memorandum of Understanding

Join our Telegram Channel and WhatsApp Channel for regular Updates.

Services

Gold prices poised for largest weekly decline in nearly eight months: Factors behind the downturn

Related News