On Monday, gold prices experienced a sudden surge following former US President Donald Trump's threat to impose hefty tariffs on imports from the European Union and Mexico. This announcement triggered a sense of unease in global markets, prompting investors to turn towards safe-haven assets. Consequently, gold prices reached a three-week high.
Rise in Spot and Futures Gold
On July 14th, spot gold in the international market rose by 0.2 percent to reach $3,361.19 per ounce. This is the highest level since June 23rd. Meanwhile, the August gold futures on the US commodity exchange COMEX were trading at $3,371.80 per ounce, up by 0.23 percent.
Along with this, the price of silver also saw a slight increase, rising by 0.56 percent to reach $39.175 per ounce.
Impact on MCX
The Indian Multi Commodity Exchange (MCX) also witnessed the impact. Here, the price of gold for August delivery closed up by ₹842 or 0.86 percent during the previous week. There is an atmosphere of uncertainty among traders and investors regarding the US decisions, and this is the reason for the increase in gold demand.
Gold could rise further
Kelvin Wong, a Senior Market Analyst at OANDA, stated that the tightening of US trade policies has created an environment of uncertainty in the market. This is the reason behind the increasing trend towards gold.
According to Wong, if the price of gold remains above $3,360 daily, it could further rise to $3,435 per ounce.
Focus on Dollar Index and Inflation Data
Currently, there is a weakness in the US dollar index, which is further supporting gold. Along with this, investors are now focused on the inflation data for the month of June, which is to be released on Tuesday. These figures are expected to indicate what changes the US Federal Reserve will make to interest rates in the future.
The current estimate is that the Fed may cut by about 50 basis points by December. In such a scenario, easing interest rates could benefit gold prices, as a low interest rate environment is favorable for gold.
Slight decline in Gold ETFs
SPDR Gold Trust, the world's largest gold-based exchange-traded fund, recorded a slight decrease in its holdings. On Friday, its holdings fell by 0.12 percent to 947.64 metric tons, which was 948.80 metric tons a day earlier.
Although this decline is minor, it indicates that some investors have booked profits. Still, given the current market conditions, investors may return to gold again in the coming time.
Trade Tensions and Investor Sentiment
The threat of imposing hefty tariffs on imports by the US has once again heightened trade tensions globally. This has created an atmosphere of concern among investors, especially at a time when there are already signs of a global economic slowdown.
After Trump's statement, there was a shift in investors' sentiment, and they prioritized gold over risky options like stocks. This had a direct impact on gold prices.
Domestic gold prices in India will also be affected
The turmoil in the global market may also be reflected in the gold rates in India. There are signs that gold prices in the domestic market are now gradually rising again. This increase in gold prices before the festive and wedding seasons could be a cause for concern for customers.
Although the demand for gold across the country remains stable for now, as soon as the market gets some more clarity regarding interest rates and inflation data, further fluctuations can be seen in domestic rates.
