Gold Prices Can Fall If Russia-Ukraine War Situation Normalizes: Analyst

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oi-Kuntala Sarkar

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Gold rates in the global markets have been surging sharply from the end of February, which reached near the all-time high level in March, reflecting a similar trend in the Indian markets. The precious metal rates have gained a safe haven again uncertainties in the global scenario. Investors have realized the importance of investing in gold along with equities, checking the yearly returns from the commodity. Now, the markets are quite bullish, but traders have earned reasonable profits, who bought gold before February this year when the prices were under pressure.

However, according to a recent Emkay Wealth Management report titled ‘Navigator’, “The gold prices have been rallying but may fall if the Russia-Ukraine war situation normalizes. Except for the UK, the interest rates in the rest of Europe have not been hiked so far, and it is felt that it may be delayed. The aggressive stance by the US Fed is likely to cause some problems as US Dollar yields rise and the currency strengthens. The prices of commodities quoted in US Dollars are likely to gradually ease. This trend could accelerate with the war clouds subsiding in Eastern Europe if negotiations meet with some success.”

The gold rates and the US Dollar index are generally adversely related, but the war situation brought a different circumstance. Both gold rates and the US dollar index surged consistently. However, today, the gold rates fell marginally than yesterday while the currency market remained bullish today in the spot market.

Additionally, the report mentioned, “From the range of US$1760 to US$1860, where it stayed for almost 6 months, the breakout to higher levels happened as inflationary expectations went up in almost all major economies.” After the inflation rate reached 40 years high range in the USA, gold rates got triggered again.

Indian gold prices fell marginally in India today on March 28. The 22 carat gold rates are quoted at Rs. 47,950/10 grams falling by Rs. 250, while the 24 carat gold rates are quoted at Rs. 52,310/10 grams, falling by Rs. 280. Emkay Wealth Management also said, “Price level pressures emerged in India too. This development kindled the demand for gold. The twin factors, inflation, and war, in short, helped this pick-up in gold prices. Gold ETFs received net inflows to the tune of US$ 2 billion in February, after a pick-up in January. Both North American and European ETFs witnessed inflows. The same trend is expected to be maintained in March too.”

Today, the Comex gold futures were quoted at $1940.00/oz, falling by 0.72%, till last traded. Yesterday it was last quoted at $1954.20/oz. The spot gold prices are quoted at $1939.10/oz, fell by 1.04%, till last traded. On the other hand, the US dollar index in the spot market stood at 99.07, gaining marginally by 0.23%. In India, the MCX gold in April future was quoted at Rs. 51,585 grams, falling by 0.56%, till last traded.

Story first published: Monday, March 28, 2022, 23:46 [IST]



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