Gold will remain in narrow range in near to medium term: Quantum MF

Gold prices declined in September as the dollar strengthened on the back of the US Fed. A rise in US Treasury bond yields put further pressure on gold.

Globally, gold prices declined on Wednesday, trading slightly above $1,750 an ounce. With the Indian rupee depreciating in the month, gold prices in India were down around 0.4% ₹46,600 per 10 grams.

According to experts, despite optimism that progress in the global economic recovery continues, high inflation and declining growth still pose risks to the outlook.

After months of mixed signals, in the midst of a Covid-19 resurgence, Fed Chair Jerome Powell sounded a flurry in the Federal Reserve’s latest policy statement in September.

Powell indicated that the bar for easing pandemic-related stimulus support for the US economy, which has been in place since the outbreak of the pandemic in March 2020, could be met as early as the next meeting in November.

This was not encouraging for gold which has flourished globally due to easy monetary policies.

“On the other hand, US bond yields and the dollar appear to be supported by the move towards policy normalisation. Now, the relief to gold investors is that it will gradually decrease gradually,” Mehta wrote in a note.

Moreover, inflation is currently on the rise, which means that real interest rates should remain low till the end of 2022, to support gold.

According to experts, the transition from one phase of the monetary policy cycle by the Federal Reserve to another will be the main driver of global markets for a few months.

“Markets will settle down when they digest the changes and revalue assets accordingly. The bread and butter of the Fed has been the Fed’s hyper-accommodative monetary stance and it is starting to normalize, which will lead to its upward move. But In the next few quarters, its usefulness as a portfolio risk diversifier and an inflation-tending asset may emerge, limiting the downside,” Mehta said.