Why are gold and US dollar rates moving in same direction? — explained

 

  • Gold rate today on MCX climbed to a new peak of ₹71,080 per 10 gm, logging over ₹3,250 per 10 gm rise in the last fortnight

  • MCX silver rate today touched a new peak of ₹82,064 per kg within a few minutes of the commodity market's opening bell whereas in the international market, spot silver price touched three-year higher levels of around $28 per ounce.

    Gold rate today: Despite the strong US dollar, gold and silver prices are continuously flirting with the record highs since last. After hitting a new peak on Friday, gold and silver prices climbed to a new peak in the early morning session on Monday. Gold price on MCX (Multi Commodity Exchange) for June 2024 expiry climbed to a new peak of ₹71,080 per 10 gm whereas silver rate today on MCX touched a new lifetime high of ₹82,064 per kg level. In the international market, spot gold price touched a new peak of $2,354 per ounce whereas silver rate today hit a three-year high of $28.08 per ounce during morning dealings.

  • However, to the surprise of most of the commodity market observers, US dollar rates too ascended in the early morning session as the US dollar index gained 0.05 percent and continued cruising close to $104.50 levels. Market observers said that barring a few sessions in the last fortnight, it is surprising that the US dollar rate and gold rates have been moving in the same direction. In the last fortnight, the US dollar index has rebounded from around 102.50 levels to the tune of 104.40 levels.

    Triggers for gold and US dollar price

    Asked about the reason for gold and US dollar rates moving in the same direction, Anuj Gupta, Head of Commodity & Currency at HDFC Securities said, "US dollar rates were expected to come down after the US Fed rate cut buzz but some promising US economic data released in the last fortnight have provided support to the US dollar against the major global currencies. Recently, weakness in major global currencies has also enabled US dollar prices to remain side-ways to positive."

  • Also Read: Why are gold, silver prices flirting with record highs despite resilient US dollar? — explained with 5 reasons

    Amit Goel, Co-Founder & Chief Global Strategist at Pace 360 said, "In traditional market dynamics, gold and the US dollar have often demonstrated a negative correlation, with the strength of one typically implying weakness in the other. However, this relationship has shown signs of weakening in recent times. Both assets are currently experiencing a surge in demand. While dollar is going up as the US economy is looking the strongest among the Developed economies and the FED appears to be the most hawkish or least dovish among all the central banks of developed economies. Gold has gone up because of the expected rate cuts from central banks all over the world and because it was grossly oversold and under-owned."

    Explaining the triggers that helped US dollar rates to move in sync with gold rates, Anuj Gupta said, "Last week, the US Labour Department released the US non-pharm payroll data, which is better than expected by the market experts. Various other US economic data signals ease in the inflation pressure that has triggered US Fed rate cut buzz. Hence, the US CPI date expected on Wednesday this week is crucial. If the US inflation data doesn't disappoint, then in that case we may witness sharp profit-booking in the US dollar, which may trigger sharp downside in the US dollar rates and strong upside in the gold and silver prices."

  • Anuj Gupta of HDFC Securities said that strength in the US dollar is short-lived and once it starts falling, we may see sharp upside in the precious yellow metal prices across bourses. He said that a fall in the US dollar may trigger on Wednesday provided the US CPI data don't disappoint global market expectations after the dovish US Fed officials.

    "MCX gold rate today has immediate resistance placed at ₹72,650 whereas ₹73,555 acts as the next resistance. the precious yellow metal has immediate support placed at ₹69,200 per 10 gm level. The MCX silver rate today is facing immediate resistance at ₹82605 per kg level while ₹84,000 and ₹86,600 levels are serving as the next significant resistance level for the precious white metal. It has supports placed at ₹72,800 and ₹75,700 per 10 gm levels," said Anuj Gupta of HDFC Securities.

    Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions. 

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