New Delhi, July 11 The gold prices in international markets are in a consolidation phase, and such consolidation prepares a fertile surface for the yellow metal to move in an upward trend, a report said on Friday.
The market is currently focusing on two factors for the movement- direction of the US interest rate and anticipated decline in the US Dollar against other major currencies, said Emkay Wealth Management in its latest Navigator report.
Amid unclarity over the likely impact of the tariffs on the US retail prices, with the Fed on hold, one of the major triggers for gold price movement is missing.
Given the current economic conditions and relatively low inflation numbers, the likelihood of the Fed implementing one or two rate cuts before the end of this calendar year is high, the report stated.
The anticipated decline in the US Dollar against other currencies, which is the second trigger for the yellow metal, can happen only with a sustained fall in the US Dollar yields and interest rates.
"The Dollar index is at 97.00 and this marks a fall of close to 10 per cent over the last six months, and a fall of about 10 per cent since the beginning of this calendar year," the Emkay report said.
The wealth management firm said that a further fall in the Dollar caused by official rate cuts and a fall in market yields is needed.
Meanwhile, a stable dollar and firming US bond yields have put downward pressure on precious metal prices over the last two weeks.
"Technical support of gold is stated to be at US$3,297 and US$3,248," the report stated
Earlier in the year, the demand for gold from China was often highlighted as a factor that was supporting higher gold prices; however, after the reported selling by China towards the end of April and beginning of May, this factor has become superfluous in the bigger picture.
There is a strong view that with the new budgeted spends to the tune of $4.60 trillion, the situation could become murkier because the resultant borrowings may put upward pressure on the yields, said Emkay.
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