US Fed rate hike fails to have much impact on gold prices

KOLKATA: Federal Reserve’s 25 basis point increase in interest rate hasn’t had much of an impact on gold prices as bullion dealers claim that the market had already factored in such a possibility. Price of gold at Zaveri Bazar was hovering aroundRs 25,500 per 10 gm on Thursday, which was almost the same as Wednesday.

There’s a feeling that consumers will become active now since the long wait for a further fall in gold prices is almost over. In the international market, gold opened at $1,067 per troy ounce, almost $5 lower than Wednesday’s closing of $1072.56 per troy ounce. On the MCX, the February contract opened at Rs 25,370 per 10 gm, which is a marginal fall of 0.38%, against Wednesday’s closing of Rs 25,468 per 10 gm. “From October 15, there has been a steep slide in gold prices, which have fallen from $1,190 per troy ounce to $1,060 level.

Since Fed’s rate hike has been in the news for a while, the market has already discounted it. Going ahead, gold prices are likely to hover around $1,040-$1,110 per troy ounce,” said Hareesh V, senior analyst, Geofin Comtrade.

Traders feels that if the rupee had strengthened against the dollar, then Indian consumers would have benefitted further. Samir Shah, VP, RiddiSiddhi Bullion, said, “The investment demand for gold is not likely to pick up. We do not see any surge in gold coins and bars sales.

It will be more of jewellery sales.” A section of bullion dealers feel that the price of gold may fall belowRs 25,000 per 10 gm within the next fortnight. Ketan Shroff, spokesperson of Indian Bullion & Jewellers Association, said, “Fed chair Janet Yellen has not been aggressive on rate cut. She had said that in every quarter of 2016, Fed will go for a rate hike after considering job data and other economic parameters. Therefore, Yellen’s indication may bring prices of gold down gradually.”

However, jewellers feel that consumers will now buy jewellery. “There is a feeling that gold prices will fall drastically once Fed announces a rate hike. They were holding back their purchasing decision for that but now the wait’s over.