Low interest rate scenario may augur well for gold demand: Experts

April gold contracts on MCX traded higher by 0.05% at Rs 46,803 for 10 grams in the morning trade on February 24 while March silver futures traded 0.31% higher at Rs 69,555 a kilogram.

In physical markets, the price of 22-carat gold was at Rs 46,000 per 10 grams in the national capital while 10 grams of 24-carat gold is available for Rs 50,180 in Delhi.

On February 23, the spot gold in the international markets had ended lower as rising US treasury yield continued to dent the appeal for the safe haven.

However, the fall in yellow metal was limited with dovish comments by US Federal Reserve Chairman Jerome Powell.

The US Federal Reserve has indicated a continuation of the low interest rate scenario until the targeted inflation is
achieved which further boosted demand for the yellow metal.

Gold has a negative correlation with real interest rates. Low or negative real interest rates are positive for gold by reducing the attractiveness of holding bonds.

The yellow metal also found some support as the global stocks traded lower on signs of rising inflation.

The demand for the yellow metal therefore may remain elevated as it considered a hedge against inflation and
currency debasement, expert said.

“An accommodative stance by US Federal Reserve and a bleak global outlook on the economy will augur well for gold demand and weaker dollar too may shift the investors towards gold,” said Anuj Gupta, Deputy Vice President, Commodity and Currency Research at Angel Broking.

However, appreciation in rupee may cap gains in gold prices in the immediate term.

“For today, traders can go for sell in gold at Rs 47,000 levels with the stop loss of Rs 47,300 levels and for the target of 46300 levels. They can also go for sell in silver at Rs 70,000 levels with the stop loss of Rs 70,700 levels for the target of Rs 68,500 levels”, said Gupta.