Gold prices rise by Rs 1,600/10 gms after Moody's downgrades US rating. Here's what analysts predict
Gold June futures on the MCX opened sharply higher, rising by Rs 1,600 or 1.7 per cent to a day's high of Rs 94,031 per 10 grams, driven by safe-haven buying after Moody's downgraded the U.S. long-term issuer and senior unsecured ratings from AAA to AA1.
Meanwhile, silver July futures contracts were trading higher at Rs 95,649/kg, rising by Rs 331 or 0.35%.
Internationally, gold prices climbed above $3,220 per ounce on Monday, rebounding from last week's steepest decline in six months. The recovery was fueled by renewed safe-haven demand after Moody's downgrade, citing fiscal imbalances and rising debt costs.
'This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,' the credit rating agency said in its report.
Despite recent optimism from a temporary US-China tariff truce, weak US economic indicators and subdued inflation have led markets to price in additional interest rate cuts by the Federal Reserve, offering further support to bullion.
On Friday, gold and silver settled on a weak note in the domestic as well as the international markets. Gold June futures contract settled at Rs 92,441 per 10 grams with a loss of 0.78 per cent and silver July futures contract settled at Rs 95,318 per kilogram with a loss of 0.62%.
Gold and silver prices showed very high price volatility last week and showed a heavy sell-off amid the US-China trade deal and strength in the dollar index. Investors booked profit in precious metals and turned towards riskier assets after US-China agreed to reduce trade tariffs on each other for the period of 90 days.
Today, the dollar index (DXY) was hovering around the 100.80 mark, falling 0.29 per cent or 0.29.
In the last week, Gold prices witnessed their biggest weekly fall since mid-June 2021 and slipped to 5-week lows. Silver prices also slipped to 2-week lows and are facing resistance at higher levels.
What analysts predict for gold?
'Gold prices have remained rangebound over the last two sessions due to a lack of positive triggers as the US reached a temporary truce with China and tensions between India and Pakistan have also eased. However, Moody's decision to lower the US credit profile by one notch could dampen sentiments for the time being around risky assets, including stocks, which could provide a fillip to safe-haven assets like gold again, as buying may emerge from lower levels, and spill over to MCX Gold as well,' said Aksha Kamboj, Vice President of India Bullion and Jewellers Association (IBJA) and Executive Chairperson at Aspect Global Ventures.
He added that this, coupled with domestic buying ahead of the upcoming wedding season in India will ensure that the downside is capped and prices remain at elevated levels.
Further, Manoj Kumar Jain of Prithvifinmart Commodity said that he expects gold and silver prices to remain volatile this week amid volatility in the dollar index and ahead of the Russia-Ukraine peace talks.
'Gold prices could test their next support level of $3,120 per troy ounce and silver prices could also test $31.40 per troy ounce levels,' he said.
On MCX, he noted the following ranges for the precious metals:
Gold has support at Rs 91,950-91,400 and resistance at Rs 92,850-93,360
Silver has support at Rs 94,650-93,800 and resistance at Rs 96,000-96,650
Jain suggests selling gold on the rise around Rs 93,200 with a stop loss of Rs 94,200 for a target of Rs 91,100.
Gold rates in physical markets
Standard gold (22 carat) prices in Delhi stand at Rs 57,192/8 grams while pure gold (24 carat) prices stand at Rs 60,976/8 grams.
Gold Price today in Mumbai
Standard gold (22 carat) prices in Mumbai stand at Rs 57,008/8 grams while pure gold (24 carat) prices stand at Rs 60,800/8 grams.
Gold Price today in Chennai
Standard gold (22 carat) prices in Chennai stand at Rs 56,688/8 grams while pure gold (24 carat) prices stand at Rs 60,408/8 grams.
Gold Price today in Hyderabad
Standard gold (22 carat) prices in Hyderabad stand at Rs 56,888/8 grams while pure gold (24 carat) prices stand at Rs 60,648/8 grams.
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