Gold Tossed Around Like a Light Cork

Gold is like a light cork tossed up and down by the waves of news emanating from the US on the shape of the economy and the prospects of the interest rates. The fierce rise in economic growth and the resultant prospects for a rise in interest rates pushed gold prices down back to the 1730 levels from where a recovery is on at this juncture to 1780. We have seen it close to 1880 and 1900 prior to the FOMC meeting, and the implicit indications of a likely rise in US rates faster than expected led to the fall in gold prices. This factor will continue to cap the rise in gold prices in the coming two quarters at least. The only factor that can give life to gold prices is the rise of uncertainties back again in the form of a stronger wave of the pandemic, or a persistently high inflation for a prolonged period of time. In fact, it is seen from the past that any sustained rise in consumer prices may provide buoyancy to gold prices. For the time being the broad range for gold will be 1690 to 1885. US data will be crucial in determining the direction of prices.

Domestic investors may look at the sovereign gold bonds as an attractive avenue for investing into gold. The bonds also offer an opportunity to earn 2.50 % per annum on the face value of the investments which is something not available with any other gold product.






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