Gold prices declined on the MCX while continuing to rise in international markets on Tuesday, as Treasury yields softened from recent peaks and expectations surrounding a US Federal Reserve rate hike diminished. Gold futures for October delivery on the MCX decreased by Rs 133 per 10 grams, settling at Rs 1,54,129 per 10 grams on Tuesday morning. December contracts fell to approximately Rs 1.56 lakh per 10 grams. In international markets, gold prices experienced a slight increase as US Treasury yields retreated from their recent peaks, while traders anticipated the forthcoming release of the Federal Reserve’s meeting minutes. Spot gold increased by 0.2% to $4,342 per ounce, following a decline of nearly 2% in the prior session. Meanwhile, US gold futures for December delivery declined by 0.6%, settling at $4,396.30.
US President Donald Trump stated that the US is not involved in discussions with Iran, which has heightened supply concerns, despite his assertion that the Strait of Hormuz continues to be accessible for traffic. Trump also asserted US control over the strategic waterway in an AI-generated image depicting the Strait as “NEW US Territory.” Iran responded by cautioning that his assertions would be “corrected” and characterised them as delusions. Rising oil prices may bolster the argument for increased interest rates to manage inflation, even in light of recent US economic indicators revealing unanticipated job losses, subdued inflation, and lacklustre retail spending in July.
Gold is recognised for its role as an inflation hedge; however, elevated interest rates generally exert downward pressure on gold prices by bolstering the dollar and enhancing the appeal of yield-bearing assets to investors. Traders are presently assigning a 65% probability to the Federal Reserve maintaining current interest rates, while a 35% likelihood is attributed to a potential rate increase in September, as indicated by the CME FedWatch Tool. The recent pullback in gold prices may have created an opportunity for investors to gradually accumulate the yellow metal, as noted by Jefferies’ Global Head of Equity Strategy Christopher Wood and billionaire hedge fund manager John Paulson. Both hold the view that the precious metal may be entering the initial phase of a prolonged bullish trend.
“As people lose faith in paper currencies, gold as an alternative will continue to grow,” Paulson said in an interview. Paulson, whose bet against subprime mortgages became one of the most profitable trades in Wall Street history, turned his attention to gold in 2009. “Gold is becoming the most apt reserve currency in the world, replacing fiat currencies,” Paulson said. “The demand from central banks, for instance, has continued to grow, as has the private sector.” Wood, in his Greed and Fear report, indicated that investors ought to start accumulating gold and gold mining stocks once more following a prolonged hiatus.
