Gold retreats on fears of US interest rate hike despite escalating Russia-Ukraine war

Boolean Bits - Dinesh Parekh

- Gold and silver likely to raise prices after Holi with increased demand: indications of increasing smuggling

The global crisis has become serious due to Putin's speech that the war between Ukraine and Russia will continue in the free market and President Biden's visit to Kiev. But the dollar strengthened as details of the Fed meeting on precious metal prices -- the move by the Fed to raise interest rates more aggressively and try to control commodity prices by controlling inflation -- resulted in gold softening to hit a bottom of $1,815 an ounce, signaling a bearish trend. supported.

The Fed's policy of continuing to raise interest rates led gold investors to stay out of the trade on Tuesday as US economic and financial data eased. Christopher Wang, strategist at OBX-FX, says the Fed has put the brakes on gold's rally by implementing a decision to raise interest rates more hastily. High interest rates discourage investors from investing in precious metals that earn interest without their own money. (hits the brakes).

Gold has shown its highest price this year since April 2022 and registered an increase of 6 percent as the job market is tight, but prices have fallen since then. Also, banks will increase the interest rate in March-April-May. The Fed's new policy will change gold prices and as the dollar index rises, gold will become more expensive in dollar terms. Gold prices will find a new direction under pressure and look bullish in the long run. Experts say that when the market stabilizes, investors tend to invest in precious metals like gold and silver. By importing 58 tons of gold from Switzerland after 2012 in January 2023, the record of import of last 11 years has been broken. Currently, the Turkish government has started efforts to control inflation and stabilize the currency by limiting the import of gold after the earthquake.

The continuous rise and fall of oil prices, China's new year demand for gold, India's reduced gold imports in January, continuous gold purchases by central banks, global financial crisis due to war, etc. have made gold bearish, but to be safe from the global financial crisis, people will again be attracted to gold and in gold. It is estimated that the boom will flare up and the price of gold will reach $2000 per ounce by the end of 2023.

An environment of softness has been created in the global silver market and prices have settled around 2100 cents per ounce. Current silver withdrawals from the New York and London vaults are increasing, but there does not seem to be a major shortage.

Silver production has not decreased, despite increasing new silver discoveries in silver mines and increasing the cost of silver production as mines have to dig deeper as silver grades decrease. The production of silver as a by-product will increase and the income of old silver scrap has improved.

New York's Comex market has seen a decline in short-term positions, while long-term positions have increased, and investors and speculators are expecting silver prices to rise. Demand for silver will be good as solar energy becomes more important in India and India's silver imports will increase due to lower prices. Which will work to prevent a slowdown in global silver prices. In the domestic gold market, the demand in gold jewelery showrooms is decreasing as weddings end and Holi days approach. Also, with the continuous decrease in the price of gold, the showroom owners buy gold as per requirement. The futures price was quoted at Rs.55836 per ten grams on Thursday while spot gold was quoted at Rs.56700 per ten grams. The fear of inflation and the erosion of shares in the stock market is affecting the minds of investors and they are sitting quietly thinking when to invest their money in gold. Because after seeing the high price of Rs.58,000 per ten grams, gold is showing softness and is waiting for the prices to come down by keeping restraint in making new investments. It should be noted that there has been a huge increase in gold smuggling at present and smugglers have become active again and are sending more gold through passengers and with the help of airport workers with new techniques. A new trend is seen in that the process of buying gold with that money has started in a big way by the passengers taking the foreign currency by plane to Dubai or Singapore. In it, a lot of gold is entering India from the Indian borders of Meghalaya, Tripura, Bhutan, Assam and Bangladesh. It is estimated that 390 tonnes of gold was smuggled into India last year.

Old Gold Income Gold income is declining after the rise in gold prices. The buyer of old gold jewelry pays Rs.300-400 per ten gram less than the market price and the seller pays the buyer by deducting a ton of gold in the name of the investor. Overall, traders are bearish on gold and say prices are likely to touch around Rs 56,000 per 10 grams.