On Wednesday, Fed Reserve Chairman Powell’s testimony increased expectations of a rate cut. The possibility of easing increased as he cited a lower-than-expected inflation rate, poor manufacturing sector growth, and the threat of a global slowdown. Despite strong American labor statistics, a 50 bp cut is possible. Although TheGoldAnalyst.com’s in-house strategist supports a base case for a 25 basis point cut. The dollar index slipped, and most Asian currencies were on the uptake. The bullish gold market continued to develop in these circumstances.
Rupee Hits High in India
In India, the rupee hit an 11-month high against the dollar. in the wake of Powell’s announcements. This is up from Wednesday’s decline, which was attributed to foreign fund outflows and crude oil import pressures. The fund outflow is likely to increase following rate cuts that could happen as early as this month. The 10-year government bond yield also went up by 0.011% from Wednesday’s close. In contrast, the US Treasury yield fell by 0.076%. Global stocks and Asian currencies also saw a rise as the dollar index slipped.
Gold Prices Surge
Gold has rallied throughout the year due to simmering global trade tensions and dovish Fed signals. This pattern was also visible in India, as the gold futures for August delivery hit a record high. It rose by 0.9% on the Multi Commodity Exchange of India. Similarly, the SPDR Gold Trust, which derives its value from gold, also rose by 0.8%. Spot gold prices displayed a monthly high. Silver prices also followed this trend and gained 0.3% on the global market. The Chinese Central Bank continues to increase its gold bullion reserves. It is the biggest consumer of gold in the world.
The weakening dollar and trade concerns have been the leading causes of the surge in gold prices. As demand for gold in India is always increasing, gold prices are likely to remain on the uptake.