Informist, Thursday, Jun 16, 2022
By Chinmay Mungse
MUMBAI – GOLD contracts on the Multi Commodity Exchange of India were trading higher today as the rupee plunged to a record-closing low against the US dollar. A weaker rupee makes the dollar-denominated commodity more expensive for Indian investors.
* Benchmark gold contracts on the COMEX were trading flat as losses due to a jump in US treasury yields and a rise in the US dollar index were offset by the rising safe-haven demand for the precious metal.
* The 75-basis point rate hike by the US Federal Reserve flagged off recession fears, which boosted the demand for the yellow metal as a safe-haven asset, said analysts.
* The rate hike was already factored in by the markets, while slower economic growth projections boosted the safe-haven appeal for precious metals, said Ajay Kedia, research head at Kedia Comtrade.
* According to its own economic projections, the US Fed expects growth to be slower, and the unemployment rate and inflation to be higher which could lead to a recession. The central bank slashed the growth forecast for 2022-23 (Oct-Sept) to 1.7%, from the earlier projection of 2.2%.
* US Fed Chair Jerome Powell in his speech post the central bank meeting said, “The central bank will deliver another big hike in July, but today’s 75-bps increase is an unusually large one, and I do not expect moves of this size to be common.”
* “The US Fed is still behind the curve and if the inflation does not subside with this rate hike and the US Fed keeps pushing for a 50-bps rate hike, then the demand for precious metals would rise, driving the prices higher,” said Sriram Iyer, senior analyst at Reliance Securities.
* At 1737 IST, the most-active contracts of bullion were:
–June gold was up 0.1% at 50,498 rupees per 10 gm on MCX
–June gold was flat at $1,820.9 an ounce on COMEX
–July silver was down 0.4% at 60,465 rupees per kg on MCX
–-July silver was up 0.3% at $21.36 an ounce on COMEX
* Outlook for the evening session:
–MCX gold seen at 50,300-50,900 rupees,
–COMEX gold seen at $1,810-$1,850
–MCX silver seen at 59,938-61,318 rupees
–COMEX silver seen at $20.97-$21.85
US$1 = 78.07 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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