Gold Prices Rise to Four-Week High on September 2, 2023: Is it Time to Invest?

Today’s gold prices have surged due to concerns about the US Federal Reserve potentially pausing its interest rate hikes in the upcoming September meeting. Gold prices experienced a significant uptick later in the past week. On the Multi Commodity Exchange (MCX), gold futures contracts for October 2023 closed at ₹59,410 per 10 grams. In the international market, spot gold prices reached $1,939 per ounce.

Similarly, silver prices on MCX for September expiry concluded at ₹73,514 per kilogram, while in the international spot market, silver rates ended at $24.16 per ounce.

Experts in the commodity market attribute the rise in gold and silver prices to the speculation of a pause in US interest rate hikes due to a series of weak economic indicators in the US. They anticipate that both gold and silver prices will continue to trend upward in the near term, possibly reaching ₹60,500 levels on MCX and $1,980 per ounce in the international spot market.

Reasons Behind the Gold Price Rally

Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors, explained the factors fueling the rally in gold prices. She stated, “Gold prices saw a sharp increase during the week, reaching a four-week high. This rally can be attributed to a string of lackluster economic indicators from the US, which has sparked optimism among investors that the US Federal Reserve will maintain its current stance on interest rates in the upcoming September meeting. Gold prices surged by nearly 1.3%, signaling renewed strength.”

She further noted, “Key data of the week, such as the second estimate of US Q2 GDP data being revised downward to 2.1% on an annual basis, private sector ADP employment figures for August displaying softness, and the PCE price index rising to 3.3% in July, all contributed to the speculation that the US central bank would uphold its hawkish stance.”

Sugandha also highlighted the mixed narrative of the US non-farm payrolls report, saying, “While US employers added 187,000 jobs in August, surpassing expectations, it was coupled with significant downward revisions to the July and June payrolls reports. Wage growth moderated to 4.3% from 4.4% in the prior month, though the unemployment rate inched up to 3.8% from 3.5%.”

US Fed Rate Pause Speculation

Navneet Damani, Senior VP – Commodity Research at Motilal Oswal, pointed out the growing speculation of a US Federal Reserve rate pause, saying, “CME Fed-watch tool shows that bets on the Fed leaving rates unchanged in September rose to nearly 91%, while bets of a pause in November rose to nearly ~60%, supporting the safe haven appeal of gold and silver.” He suggested that the broader trend on COMEX could range from $1,930 to $1,955, and on the domestic front, prices could hover in the range of ₹59,000 to ₹59,750.

Outlook for Gold Prices

Anuj Gupta, Head – Commodity & Currency at HDFC Securities, provided insights into the near-term levels to watch for in gold prices. He stated, “Near term support for COMEX gold is placed at $1,900 per ounce levels, with strong support at $1,880. On the upside, gold prices have an immediate hurdle at $1,955, and upon breaching this level, we expect spot gold prices to reach $1,980 per ounce.”

Sugandha Sachdeva added, “We believe that gold will continue to trade with a positive bias for the week, with intermittent profit booking opportunities, as long as prices remain above the support level of ₹58,500 per 10 grams. We anticipate gold reaching levels of around ₹60,000 per 10 grams and subsequently targeting ₹60,500 per 10 grams. It’s essential to monitor upcoming data, including US services PMI data, Trade Balance figures, and inflation data from China, all scheduled for release in the coming week.”