Gold Prices Hit 10-Month High. Will They Rise Further?

Some analysts expect global gold prices to advance further.

Gold Prices Hit 10-Month High. Will They Rise Further?

Domestic gold prices have also gone up, tracking global prices.

Global gold prices hit their highest in nearly 10 months on Monday, boosted by safe-haven demand after North Korea's latest nuclear test. Spot gold rose 0.7 per cent to $1,333.28 in New York per ounce, touching its best since November 9 at $1,336.79. "What dominates the market is really the geopolitical tensions right now, either in North Korea or in the United States," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.  North Korea on Sunday conducted its sixth nuclear test, of what it said was an advanced hydrogen bomb, prompting the threat of a "massive" military response from the United States if it or its allies were threatened. 

5 Things To Know About Gold Price Rise

1) Domestic gold prices have also risen, tracking global cues. Futures contracts for October expiry rose by nearly 1 per cent to Rs 30,065 on MCX. 

2) Some analysts expect global gold prices to advance further. "The support level (for gold) at $1,300 should be rather robust at this moment and because of the need for risk-aversion $1,375 should be possible as a price range," the Wing Fung Financial Group analyst said.  

3) Some analysts also don't see an immediate Fed rate hike and the shrinkage of the US central bank's massive sheet. On Friday, after a US government report showed employers added fewer jobs in August than expected, some traders held to expectations that the Federal Reserve would wait until the middle of 2018 before raising rates.  Gold is still likely to rise further after prices increased by 4.1 percent in August, the biggest monthly gain since January, said Mitsubishi analyst Jonathan Butler. "The technical uptrend is well established, there is continuing uncertainty over North Korea's nuclear ambitions and an imminent wrangle between Congress and the White House over the debt ceiling that must be solved by late September to avoid technical default," he said.

4) Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

5) Investors were also looking ahead to a European Central Bank (ECB) meeting on Thursday. Markets are expecting no policy change from the ECB this month but the bank is likely to announce a reduction of its monthly asset purchases in October, according to a majority of economists in a Reuters poll. (With Reuters Inputs)

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