By Naveen Mathur

Spot gold ended at $1,972 per ounce in the holiday shortened week, up by $26.7 or 1.37%, posting its second straight weekly gain, as the Ukraine crisis and broadening inflationary pressures lifted the safe-haven metal’s appeal, while investors seemed to look past impending interest rate hikes from the Federal Reserve. The SPDR Gold ETF witnessed a small up-tick as holdings at the world’s largest Gold Backed ETF grew to 1,099 tonnes on 14 April 2022 from 1,090 as on 8 April 2022. 

The latest data showed that the US annual inflation rate rose 8.5% in March, accelerating at its fastest pace since December 1981. Meanwhile, investors remained on edge over the Ukraine war after US President Joe Biden announced an additional $800 million in military assistance to Ukraine on Wednesday, ahead of a wider Russian assault expected in eastern Ukraine. 

Uncertainties and a potential escalation in the Ukraine war have also pushed commodity prices higher, creating a more inflationary environment.

Federal Reserve Governor Christopher Waller said Wednesday the US economy could handle aggressive tightening as he reiterated support for raising interest rates by a half point next month. Benchmark 10-year Treasury yields touched the highest since 2019 earlier in the week as traders priced in extra policy tightening, weighing on bullion.

New York Fed President John Williams said the central bank should consider raising rates by a half percentage point at its next meeting in May

While central banks the world over are racing to tame surging inflation, the European Central Bank on Thursday stuck to its plans to dial back stimulus this year, a move seen as less aggressive in the face of soaring inflation.

Outlook for this week is bullish but a strong dollar is a major headwind for the moment. Couple of important speeches will draw attention. On 19 April Fed’s Bullard will discuss the shape of the US economy and monetary policy. On 21 April Fed chair Jerome Powell and EBC head Lagarde will take part in the IMF panel on the Global Economy. Hence, traders may want to wait for a while before taking a decisive call. MCX Gold June future may experience a small technical correction and price may dip to Rs 52,500 per 10 gram but eventually may rally towards Rs 54,000 per 10 gram in coming weeks.

(Naveen Mathur, Director, Commodities and Currencies, Anand Rathi Shares and Stock Brokers. Views expressed are the author’s own.)