Gold prices have surged to new heights in the last few trading sessions, reaching above $2,500 per ounce, driven by growing expectations of a potential US Federal Reserve rate cut, market experts said.
The anticipation of lower interest rates has led to a decline in US Treasury yields and a weaker US dollar, both supportive factors for gold prices, Mohamed Hashad, Chief Market Strategist at Noor Capital, said.
He said from a technical perspective, gold prices appear to be in a strong uptrend, with the Relative Strength Index (RSI) suggesting buying momentum is gaining traction.
A break above the year-to-date high of $2,531 could lead to further gains, Hashad said.
The price of the yellow metal on Tuesday morning hours traded flat with a negative bias in the futures market in India.
Market participants said a rise in the US dollar and caution ahead of the US inflation data on Wednesday weighed on gold prices.
The dollar rose to its one-week high level, putting pressure on gold prices, they said.
The dollar’s rise is negative for gold prices since the yellow metal is priced in dollars.
When the dollar’s value rises, gold becomes expensive in other currencies, eroding its safe-haven appeal.
Market experts said the US Federal Reserve’s upcoming policy meeting on September 17-18 is the biggest near-term trigger for gold.
However, they pointed out that only a bigger cut of about 50 bps will trigger gold prices upwards.
The market has already discounted a 25-bps rate cut this time, and it may not boost prices, they said.
The short-term movement of the commodity prices will also depend on the US Consumer Price Index (CPI) data to be released on Wednesday and the Producer Price Index (PPI) prints on Thursday.
According to a Reuters poll, the US headline CPI is expected to have risen 0.2 percent month-on-month in August, unchanged from July.
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