Gold Price Trends in India: Support Levels and Global Influences
On Friday, September 13, 2024, gold prices in India are expected to hold support between ₹71,750 and ₹71,500. Several factors are at play in shaping gold’s performance, including global economic events, central bank policies, and currency fluctuations.
Global Economic Impact on Gold
Overnight, the Euro gained strength against the U.S. dollar following an interest rate decrease by the European Central Bank (ECB). Despite this, gold may encounter resistance due to ECB President Christine Lagarde dismissing the likelihood of another rate cut in the upcoming October policy meeting. Meanwhile, attention is turning to the U.S. Federal Reserve, which is expected to implement a 25 basis points rate cut in the coming days.
Gold prices are typically sensitive to macroeconomic developments, and the anticipation of rate cuts by central banks is influencing market sentiment. In addition to rate cut expectations, geopolitical tensions and economic uncertainties are adding to the demand for safe-haven assets like gold.
Gold Prices in India: Slight Dip in Early Friday Trading
In India, prices of different gold categories, including 24K, 22K, and 18K gold, showed a slight dip in the early hours of Friday. As of this morning:
- 24K gold (10 grams) is priced at ₹73,140
- 22K gold stands at ₹67,040
- 18K gold is priced at ₹54,850
Performance of MCX Gold and Silver
On Thursday, the Multi Commodity Exchange (MCX) saw a slight upward movement in gold and silver futures. The October gold futures on the MCX saw a one-day gain of ₹37, closing at ₹72,861 per 10 kilos. Silver futures, with a December expiry, also climbed to ₹87,100 per kilogram.
The market’s reaction can be attributed to growing expectations of a U.S. interest rate cut by the Federal Reserve. A rate cut generally weakens the dollar and boosts demand for gold, as the metal becomes cheaper for holders of other currencies.
Global Gold Prices: Spot and U.S. Futures
Globally, gold prices surged over 1% on Thursday, reaching record highs due to expectations of a rate cut by the U.S. Federal Reserve. U.S. data signaled a slowdown in the economy, further fueling these speculations.
- Spot gold rose by 1.6%, reaching $2,551.19 per ounce.
- U.S. gold futures increased by 1.4%, reaching $2,578.90.
Gold Price Outlook: Support and Resistance Levels
Looking ahead to Friday, September 13, 2024, gold is expected to maintain support within a defined range. Jateen Trivedi, Vice President and Research Analyst for Commodities and Currency at LKP Securities, commented on the current state of gold. According to him, gold found support on the Comex market at $2,510 and on the MCX at ₹71,900. Trivedi attributed the stable dollar index and anticipation of an interest rate cut to the buying interest at lower levels.
He further explained that gold prices are expected to stay within a range until the policy announcement and subsequent projections from the U.S. Federal Reserve. In terms of specific price ranges, Trivedi forecasts:
- Support levels: ₹71,750 to ₹71,500 in India
- Resistance levels: ₹72,200 to ₹72,350 in India
- Comex resistance: $2,525 to $2,530
Gold’s movement will also be influenced by India’s Consumer Price Index (CPI) inflation data, which rose slightly to 3.65% in August 2024. Despite this increase, the Reserve Bank of India (RBI) is not expected to change its rates in the upcoming October policy meeting, even though a Federal Reserve rate cut appears more likely.
India’s CPI Inflation Data and its Impact
Arsh Mogre, an economist at PL Capital – Prabhudas Lilladher, shed light on India’s recent inflation data. In August 2024, India’s CPI inflation increased modestly from 3.6% in July to 3.65% year over year. Although this marked a slight increase, the inflation rate remains comfortably below the RBI’s medium-term target of 4.0%, marking the second consecutive month of such results. However, the August figure exceeded market expectations of 3.42%, primarily due to ongoing food price pressures.
The combined Consumer Food Price Index (CFPI) rose to 5.7%, up from 5.4% in August. A closer look reveals that rural inflation continues to outpace urban inflation:
- Rural CPI: 4.2% year-on-year (up from 4.1%)
- Urban CPI: 3.1% (slightly up from 3.0% in July)
This rise in rural inflation was driven mainly by food prices, which increased to 5.6%.
Outlook on India’s Monetary Policy
Looking ahead, Mogre warned that while the overall CPI remains under control, the persistent food inflation could pose challenges for the RBI’s inflation management strategy. If food price volatility persists, it may complicate efforts to maintain stable inflation levels.
However, Mogre said that there is cause for cautious optimism given the decreasing cost of energy and the lack of a discernible increase in core inflation. Although the U.S. Federal Reserve is expected to bring down interest rates as early as September 2024, he projected that the RBI is unlikely to start its rate-cutting cycle before the third quarter of FY25.
Conclusion
Gold prices in India, as well as globally, are currently influenced by a combination of macroeconomic factors, including interest rate cut expectations, inflation data, and the dollar’s performance. In India, gold prices have dipped slightly, but they are expected to hold support between ₹71,750 and ₹71,500. As central banks worldwide, including the U.S. Federal Reserve and the European Central Bank, navigate their monetary policies, gold is likely to remain within a defined range, with resistance around ₹72,200 to ₹72,350.
With global economic uncertainty and persistent inflationary pressures, gold will continue to be a key asset for investors seeking stability.