Gold to shine more amid IMF’s word of caution, easing interest rates

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Updated: July 24, 2019 11:56:52 AM

After the International Monetary Fund (IMF) revised global growth downwards, the analysts are positive on gold prices ahead of US Federal policy next week.

U.S. gold futures were down 0.2% at ,424.10 an ounce.Gold prices to gain momentum amid interest rate cut expectations and IMF’s forecast on global growth slowdown

After the International Monetary Fund (IMF) revised global growth downwards, the analysts are positive on gold prices ahead of US Federal Reserve policy next week. The domestic gold prices on Tuesday hit a record high amid weak equity markets and a weak dollar. In the national capital, the yellow metal prices soared by Rs100 to hit a fresh high of Rs 35,970 per 10 gram. According to Jigar Trivedi, Fundamental Analyst – Commodities with Anand Rathi Shares and Stock Brokers, the outlook for gold is bullish ahead of Federal Reserve and European Central Bank (ECB) meeting which are likely to cut interest rates. 

The IMF on Tuesday reduced India’s FY20 growth forecast by 30 bps to 7 per cent, on account of the lower-than-expected outlook for domestic demand. Similarly, the FY21 forecast has been cut by 30 bps to 7.2 per cent. However, India would continue to remain the fastest-growing major economy globally, ahead of China, the global financial institution said. According to analysts, uncertainty over Brexit, tensions in the Middle East and US-China trade war are likely to augur well for the gold prices internationally and domestically both. 

The gold prices will gain momentum in the backdrop of likely rate cut by the US Federal Reserve next week, according to analysts as the lower interest rates prove to be a boon for the safe haven. “Prospects of risk assets including metals should get a boost from news that the US officials will head to Shanghai next week for the first high-level, face-to-face trade negotiations with China since talks broke down in May. The risk of failure is highlighted as the IMF again cuts its global and Chinese growth forecasts, warning that policy missteps on trade could derail any rebound. US new home sales for June and Markit manufacturing PMI may support the dollar to rally further, putting pressure on overall commodities,” Anand Rathi Shares and Stock Brokers said in a report.

Gold prices are likely to trade in the range of Rs 34,800-35,200 per 10 gram on MCX while sentiments still remain firm on prospects of an interest rate cut by the US Federal Reserve and escalating tensions in the Middle East. Today, gold prices may discern some pull back on rupee firmness despite dollar reinforced against most major currencies.

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