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Should you buy or sell Gold ahead of Budget 2025? Check rate, outlook

Gold rate today: India's budget to be presented on February 1 will be important for domestic gold prices as import duty on precious metals may be increased.

Gold, Gold price, Gold rate

Credit: Bloomberg

Praveen Singh Mumbai

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Gold: A fresh record high as US Dollar and yields soften

 

Gold Rate:

 
On January 30, spot gold hit a fresh record high of $2,798 on subdued US yields and lacklustre US Dollar Index moves.
 
The US FOMC monetary policy decision, delivered on January 29, did not offer much on the future course of the monetary policy. The US Dollar Index was unable to gain upward traction post FOMC decision. Similarly, the US bonds remain bid; thus, yields have eased. Disappointing European data, the US GDP data falling short of forecast, and the rate cut by the European Central Bank also supported the metal prices.
 
 
Spot gold was up around 1.25 per cent on the day. The MCX April gold contract, at Rs 82,045, was up 1.45 per cent.
 

 Event roundup:

 
The US FOMC's policy decision was in-line with the expectations as the US central Bank kept the Fed Fund rate unchanged at 4.25-4.50 per cent. The Fed conveyed that it is not in a hurry to cut rates as unemployment rate is stabilising at low levels, economic growth pace is solid, and inflation remains inflated. 
 
It removed the sentence 'inflation is progressing towards its goal of 2 per cent'. The Fed Chair later clarified that it was basically a language clean-up, which weighed on the US Dollar Index. As such, the Central Bank did not offer any convincing clues on its monetary policy going forward. In essence, the Fed would need more data to move its needle on the rates.
 
As widely expected, South Africa Central Bank and the European Central Bank cut rates by 25 bps each. The ECB cut the deposit facility rate by to 2.75 per cent as the Bank slashed rate for the fifth time in this rate cutting cycle. ECB President Lagarde said that the rates were still restrictive, so further rate cuts are possible. She added that conditions for recovery remain in place. 
 

Data roundup:

 
US GDP Q4 Advance reading showed that the economy grew at an annualised pace of 2.3 per cent versus the forecast of 2.6 per cent and was slower than the prior quarter pace of 3.1 per cent. Personal consumption at 4.2 per cent topped the forecast of 3.2 per cent. Weekly job data were better-than-expected.
 
The Eurozone data, however, was disappointing as Germany's economy contracted 0.2 per cent Q-o-Q, more than the expected contraction rate of 0.1 per cent, while the Eurozone's economy grew at an annualised pace of 0.9 per cent, slower than 1 per cent as expected. Italy's unemployment rate jumped to 6.2 per cent in December from 5.9 per cent in the prior month and was higher than the forecast of 5.7 per cent.

 

US Dollar Index and yields:

 
The US Dollar Index at 107.92, was down around 0.07 per cent yesterday. The ten-year US yields, at 4.52 per cent, were down around 0.60 per cent as the yields fell below the psychological level of 4.5 per cent. The 30-year yields fell nearly 0.46 per cent to 3.76 per cent.
 

Upcoming data:

 
Today's US data include real personal spending and PCE deflator inflation data (December). Germany's retail sales (December) will also be on traders’ radar.
 

Upcoming event:

 
India’s budget to be presented on February 1 will be important for domestic gold prices as import duty on precious metals may be increased. 
 

ETF:

 
Total known global gold ETF holdings stood at 83.18 MOz as on January 29. The ETFs have recorded a net inflow of nearly 0.33 Moz this year so far.

US Gold hoarding:

 
Bloomberg reports that holdings in COMEX vaults have rocketed to the highest since 2022 and is rising at the fastest pace since the pandemic on tariff concerns. Gold exports to the US from Europe's main refining hub in Switzerland have also jumped to the highest since Russia's invasion of Ukraine as traders, capitalizing on COMEX gold premium with respect to London Market, are sending gold to the US. Rise in the COMEX gold inventory has coincided with rising gold prices.
 

Gold Outlook:

 
The Q4 US GDP data, coming in weaker-than-expected; subdued US Dollar Index; and softer yields are fuelling gains in gold. Traders are monitoring tariff developments as the Trump Administration has threatened Canada and Mexico with 25 per cent tariffs starting as early as February 1. The ECB's dovish stance is also supporting the metal. 
 
Today’s US PCE deflator inflation data, the Fed's preferred gauge of inflation, will be crucial for the metal as the Fed is focused on containing inflationary pressure. Softer-than-expected inflation data will help the metal extend the rally. Support is at $2,750 (Rs 80,700)/$2,730 (Rs 80,200). Resistance is at $2,800 (Rs 82,200)/$2,850 (Rs 83,700).    
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Disclaimer: Praveen Singh is Associate VP of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.
 

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First Published: Jan 31 2025 | 11:48 AM IST

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