Gold Price Today: Yellow metal cheaper by nearly 2%; should you start buying?

Domestic gold prices tumbled on Monday tracking global benchmarks amid growing expectations of higher interest rates in the US and a jump in bond yields. On commodity derivatives exchange MCX, the near-month gold contract hit an intraday low of Rs 1,52,712 per 10 grams, down by Rs 2,882 — or 1.9 per cent — from the previous close. By 1:50 pm, the contract had recovered some losses but was still down by Rs 1,956 — or 1.3 per cent — at Rs 1,53,638.

Analysts say gold’s near-term direction is likely to depend on incoming US inflation and labour-market data, along with signals from Federal Reserve officials about the interest-rate path. Any further rise in oil prices due to Middle East tensions could also influence expectations around inflation and monetary policy.

Market participants will be closely watching upcoming US macroeconomic data for cues on the Fed’s monetary policy trajectory.

The October 5 gold contract also came under pressure, touching a low of Rs 1,55,800 during the session, down by Rs 3,170 or 2 per cent. At the last count, it was seen trading at Rs 1,57,015, lower by Rs 1,955 or 1.2 per cent.

Here are some of the key factors at play in the yellow metal:

• Fed Rate Hike Expectations: Strong US jobs data has increased the likelihood of monetary tightening before year-end, according to foreign media reports.
• Higher Treasury Yields: Rising bond yields increase the opportunity cost of holding non-yielding gold. US benchmark 10-year yield hit a two-week ​high, raising the ⁠opportunity cost of holding gold.
• Dollar Strength: Hawkish Fed positioning supports the greenback, making gold more expensive for investors dealing in other currencies.
• Inflation Concerns: Oil price surge from the ongoing Middle East conflict — now in its 15th week — raises inflation expectations, but markets are pricing in rate hikes to combat it.

In the international market, spot gold fell as much as 1.4 per cent to hit a two-month low of $4,268.7 per ounce.

The rupee moved in the range of 95.18-95.35 against the greenback in Monday’s trade.

The dollar index — which tracks strength in the American currency against six peers other than the rupee — was last seen trading 0.2 per cent lower at 99.9.

The world’s largest economy logged its third consecutive month of strong job gains in May, confirming the labour market gained traction after stumbling last year, according to foreign media reports.

This essentially leaves room for the Fed to keep rates steady amid rising inflation concerns driven by the Iran conflict.

This typically happens as the precious metal does not offer any yield.

Rising bond yields also increase the opportunity cost of holding bullion, prompting investors to shift towards interest-bearing assets.

While gold is traditionally viewed as a hedge against geopolitical uncertainty and inflation, investors appeared more focused on the possibility that higher energy prices could fuel inflation and force the American central bank to maintain a hawkish stance.

Expectations of tighter monetary policy have strengthened the dollar and pressured precious metals globally.

(These are indicative prices collected from trusted sources. Investors are advised to check prices with their jeweller before investing/purchasing.)

Is it a good time to buy gold now?

One may consider buying gold in parts at the current juncture, said Manoj Kumar Jain, director, Prithvi Finmart.

He suggests investors take the SIP route to part funds in the metal.