Expect more correction in Gold, ahead of the US Fed meeting later today, say experts; know trading strategy
The US recorded an all-time high inflation rate from 40 years at 7.9 per cent in February 2022. To deal with the high inflation, US Fed is expected to increase the interest rate first-time after 3 years in a meeting scheduled for today.
The US recorded an all-time high inflation rate from 40 years at 7.9 per cent in February 2022. To deal with the high inflation, US Fed is expected to increase the interest rate first-time after 3 years in a meeting scheduled for today. This makes today an important day for gold. Zee Business' Mrityunjay Jha spoke to a panel of experts to know whether there is the scope of further discounting or the prices have discounted already.
US Fed is expected to announce an increase in interest rates by 25 bps (0.25 per cent) in today's meeting.
What's in store for the Gold market amidst the increased rates by US Fed?
Renisha Chainani, Head Of Research at Augmont, said that due to the volatility in the market, the money was being pulled from asset class by booking profit and moved to gold.
The gold prices are already discounted as per the increase of 25 basis points (bps) and an inflation rate of 7.5 per cent to 8 per cent.
But because 2022 is expected to witness inflation through the year due to the increased commodity prices, Chainani expects that there will be further discounting of gold prices after investors have done a profit booking for the next 3 days.
What if the interest rates are increased by more than 25 bps?
Kunal Shah, Head of Commodities Research at Nirmal Bang, said that the US Fed interest rates aren't expected to increase by more than 25 bps. However, there is a chance of a 1 per cent correction in the gold prices due to the panic among investors.
In fact, oil prices are already down by 35 per cent from their all-time high.
What trades should be taken by investors at a price below Rs 51400, ahead of the US Fed decision?
Ravindra Rao, Head of Commodity Research at Kotak Securities, said that the US Fed isn't going to act aggressively due to geopolitical stress. Therefore, the gold prices will at max come down to Rs 51000. He recommended investors short the price of gold ahead of the US Fed decision, at a price of Rs 51550, with a target of Rs 51100, and a stop loss of Rs 51700.
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