Informist, Thursday, Mar 3, 2022
By Chinmay Mungse
MUMBAI – Geopolitical tensions between Ukraine and Russia and higher inflation globally are expected to keep gold prices elevated in March despite a possible interest rate hike by the US Federal Reserve.
On Feb 21, Russia announced it had recognised the two self-proclaimed states in Ukraine as independent, and sent troops to the territories. Three days later, it launched a full-scale invasion of Ukraine. The invasion boosted safe-haven demand for gold, catapulting prices on the international and domestic exchanges to over one-year highs.
Following Russia’s invasion of Ukraine, the US, the UK and the European Union have announced sanctions aimed at freezing the assets of Russian President Vladimir Putin and his foreign minister Sergei Lavrov. They have also imposed sanctions on the Bank of Russia and removed some of the country’s leaders from the Society for Worldwide Interbank Financial Telecommunication global payments system.
“If the geopolitical tensions escalate further, the US and European Union might impose more sanctions. If another tranche of sanctions is imposed, Bank of Russia will aggressively buy gold assets, thus boosting the demand for the yellow metal,” said Sriram Iyer, senior analyst at Reliance Securities.
The war between Ukraine and Russia is expected to remain a major trigger for gold prices in the month ahead, said analysts.
According to the average of the estimates of participants in a poll by Informist, gold futures on the Multi Commodity Exchange of India are seen at 49,806-53,567 rupees per 10 gm this month, and at 1,871-2,009 an ounce on COMEX.
Currently, the most-active April contract on the MCX is at 51,800 rupees per 10 gm, and the April futures on COMEX at $1,933.2 an ounce.
Apart from the geopolitical tensions, higher inflation in the US will be another factor supporting prices of the yellow metal this month. The US personal consumption expenditure index rose 5.2% on year through January, the steepest rise in 39 years.
“The Fed will take some steps in the March meeting to curb the rising prices. However, given the current geopolitical scenario, a 25-basis-point rate hike is expected as compared to the earlier expectations of a 50-bps hike,” said Ajay Kedia, research head at Kedia Capital.
US non-farm payroll data scheduled to be released on Friday, is expected to show an increase in the US labour market, which might exert pressure on gold prices, but only to an extent.
“Non-farm payroll data will not affect gold prices much in the month ahead as the outcome of the war between Russia and Ukraine will offset all the triggers coming from the data points,” said Manoj Jain, research head at Prithvi Finmart.
Following is a summary of the poll by Informist on gold prices in March and details of estimates by respondents, in alphabetical order:
End
US$1 = 75.82 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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