Sentiments are strongly bullish for Gold

Time and again, gold has enjoyed a safe haven status, and in the current pandemic scenario, investors are always on the verge of safe places to park their funds. Hence sentiments for the yellow metal have grown bullish, supported by demand and hence some analysts believe that currently gold has been overbought.

Furthermore, weakness in the dollar and low U.S Treasury yields are expected to provide further support to gold. The price of gold has extended its correction from the record highs above $2 070, registered in the first week of August. Despite this, there is no reason to panic and as long the price of gold is above $1 800 this precious metal is in the “buy” zone confirmed the spokesperson from RSBL.

The price of gold may be ready to advance higher as Federal Reserve announced that will keep interest rates lower for longer to support the economic recovery

U.S Fed kept the interest rates unchanged, as expected. The latest FOMC statement and economic projections signal are that the interest rates will stay at zero until the end of 2023. This is excellent for gold. 

On Wednesday, the Federal Reserve issued a statement regarding the FOMC meeting, which was held from September 15-16. The US central bank kept the interest rates and the conditions of its quantitative easing unchanged

U.S. weekly jobless claims report on Thursday showed a smaller-than expected decline in new claims, weighing on the dollar and bolstering the appeal of gold as an investment alternative.

The unemployment rate is forecasted to be around 7.6 percent in 2020, compared to the 9.3 percent seen in June. The fact that the recovery has progressed quicker than expected is bad news for the gold prices. But still, the overall economic activity remains well below the pre-pandemic level.

U.S. data also showed that more Americans submitted unemployment claims than forecast, with 860,000 initial jobless claims against the estimated 850,000. The data also showed that almost 30 million Americans were claiming unemployment benefits as of the end of August.

When it comes to the PCE inflation, the FOMC now sees higher inflation in 2020 (1.2 percent) than June when they expected only 0.8 percent. However, the FOMC projects that the inflation rates will be below their target until 2023, which is an excellent excuse for continuing their dovish monetary policy, thus supporting gold prices while the dollar declines.

Last week's trading saw gold forming its high in Wednesday's session, here doing so with the tag of the 1983.80 figure. From there, a decent decline was seen into Thursday, with the metal dropping down to a bottom of 1938.20 - before bouncing off the same into the weekly close.

Gold prices gained on Friday buoyed by a weaker dollar and lingering concerns over an economic recovery from the damage inflicted by the coronavirus pandemic that were underscored by elevated weekly U.S. jobless claims data.

Spot gold climbed 0.6% to $1,953.80 per ounce during Fridays trading hours and was on track for a second straight week of gains, rising 0.7% during the day.

RiddiSiddhi Bullions Limited confirmed that sentiments are strongly bullish for gold as markets expected prices to rise higher and even hover in that zone for a long time.

An environment of negative real interest rates, uncertainty over the global economic future and global uncertainties, such as the upcoming U.S. presidential election, are among the reasons that have pushed investors to build up their gold holdings.

Meanwhile, in the domestic markets, market participants await prices to stabilise as the festive season begins.  Hopes prevail in the markets that demand might rise, over price stability.