Gold Price Reclaims $2,600 Level, MCX Rate Hits Rs 75,000; Will Recovery Sustain?

Gold prices moved higher to cross the $2,600 per ounce-mark on Monday, even as US Federal Reserve Chair Jerome Powell indicated a slower pace of interest rate cuts in remarks issued late on Friday.

Spot gold was trading 1.7% higher at $2,604.6 per ounce at 02:00 p.m. (GMT), still significantly lower as compared to a high of $2,750 an ounce on Nov. 5—the day of US presidential election. The metal has been slipping since then in wake of the firming up of US dollar and bond yields.

Monday's uptick in spot gold rate in the global market also led to a climb in the Indian gold futures on the Multi Commodity Exchange. The December contracts were trading 1.43% higher at Rs 75,004 per 10 gram at 7:46 p.m.

The partial recovery in gold prices drew attention as it came in the aftermath of Powell's hawkish remarks. The Fed chief, while pointing towards the climb in retail sales, stabilisation in jobless claims and momentum in economy growth, indicated that there could be a rethink in the rate cut strategy.

"If the data let us go a little slower, that seems a smart thing to do," Powell said on Friday, adding that as of now, there are no distress signals in the US economy to accelerate the pace of cuts.

The remarks were expected to exert more pressure on gold, as higher interest rates reduce the appeal for non-yielding assets like bullion. However, the metal defied expectations by logging a 1% climb on Monday.

"The rally appears to be driven by robust physical demand, especially from Asian markets," said Anindya Banerjee, senior vice president and head of commodity and currency at Kotak Securities Ltd.

The 1% rise, as seen today, was "fuelled by chart-based buying, with traders anticipating a softening in the dollar index", said Rahul Kalantri, vice president for commodities at Mehta Equities Ltd.

Last week, gold prices had dropped to two-month lows due to the combined strength of Bitcoin and the US dollar, he pointed out.

The recovery seen on Monday also underlines gold's appeal amid global headwinds, analysts said. The metal has witnessed a historic bull run over the past 12 months, and is still up by over 30% year-on-year despite the hammering in prices following the US presidential poll.

"This year has seen several instances where gold, interest rates, and the dollar have risen together—an unusual convergence that underscores the latent demand for the yellow metal as a hedge against economic uncertainty," Banerjee said.

A recovery in gold prices will depend on the movement of the US dollar, experts said. If the dollar rally halts, then gold price could begin recovering, as the metal continues to be seen as a hedge amid the geopolitical tensions simmering in the Middle East.

Gold prices are expected to be volatile in the coming period, according to Kalantari. "If dollar index gets reverse from here the we might see good jump in gold price."

Gold’s recovery on Monday may seem short-term, but it holds the potential for a sustained rally if key support levels remain intact, Banerjee said.

"We had anticipated a dip toward $2,530 following the post-election breakdown, and prices recently tested $2,539 on the spot market before rebounding. This indicates the possibility of a base forming at these levels," the analyst noted.

Gold's volatile movement will provide opportunities for both buyers and sellers in the coming sessions, analysts said. The metal's resilience, despite the Fed's hawkish tone, reflects its enduring appeal in uncertain times, they pointed out.

"Our outlook for gold remains constructive. We recommend buying at current levels, supported by disciplined risk management," Banerjee said.

In the global market, $2,530 an ounce remains a critical support level for gold, with a positional stop loss below $2,500 an ounce, he said. On the MCX, the key support level is seen at Rs 73,000 per 10 gram, he added.

On the flip side, a breakout above $2,625 an ounce or Rs 75,500 per 10 gram on MCX will signal further gains, the expert further said.

According to Kalantari, spot gold is having strong support at $2,535 an ounce and resistance at $2,628 per ounce. "There’s room for movement in either direction," he said.

In the domestic market, investors should keep an eye on Rs 73,600 to Rs 74,840 per 10 gram, Kalantari said. "That’s the range where the action is expected to unfold."