New Delhi: The current bullion market is focused on a mix of factors, including the direction of US interest rates, the weakness of the dollar, and many others for further direction, according to a recent report from Emkay Wealth Management.
The direction of US interest rates, which is currently uncertain, has no effect on US retail price tariffs, indicating that one of the key drivers for gold is missing.
The second significant element might be the US dollar's weakness against other major currencies. This can occur only during a prolonged decline in US dollar yields and interest rates, according to the report.
Gold and the US dollar typically have an inverse relationship. When the dollar weakens, gold becomes less expensive in other currencies, boosting demand and frequently affecting its price, and vice versa.
However, the recent increase in the dollar and rising US bond rates have placed downward pressure on gold prices. The report estimates technical support for gold at USD 3,297 and USD 3,248.
What we need is a deeper drop in the Dollar due to official rate reductions and a decrease in market yields. There is a widespread concern that the new budgeted expenditures of USD 4. 60 trillion may make the scenario more complicated, as the resultant borrowings may increase yields, Emkay Wealth Management said.
Along with this, a consolidation pattern is now being seen in the gold market, which usually results in an increase in gold prices.
The study also states that earlier this year, gold prices increased owing to purchases from China. However, around the end of April and the beginning of May, when China announced a selloff, that element became irrelevant in the overall picture.
