Gold price outlook: Geopolitical uncertainties assist gold but traders remain cautious

economictimes.indiatimes.com:

gold fell to a four-month low, correcting more than seven percent from May, when it reached close to its all-time high. A steady US dollar and expectations of more rate hikes from the US Federal Reserve weighed on the prices of the yellow metal. A similar selloff was witnessed in domestic gold also.

In the futures market, prices edged lower from an all-time high of Rs 61,845 per ten grams to below Rs 58,000 last week. Weak overseas sentiments, a relatively strong Indian rupee, and a decline in demand due to record-high prices outweighed the prospect of the commodity. Market sentiment plays a crucial role in shaping gold prices.

The Federal Reserve’s communication regarding its policies and plans can sway investor confidence and influence the demand for gold as a hedge against economic uncertainty. Recently, the US Fed Chair Jerome Powell signalled more rate hikes this year to cool price pressures. Now, economists foresee a 25-basis point rate increase in the July meeting and another 25 bps increase in November.

The performance of the US dollar is closely linked to US interest rate decisions. An increase in interest rates generally makes the US dollar more attractive to investors. Higher rates can boost the demand for US assets, such as Treasury bonds, as they provide a higher return.

In the domestic market, the all-time high prices have had a noticeable impact on the physical demand for the commodity. Increased gold rates have reduced the affordability of gold jewellery and deterred consumers from making significant purchases, causing a decline in demand. Higher prices also hampered the investment demand.