Gold to be on upward trajectory

Chennai: US Federal Reserve's meeting tomorrow is expected to put gold on an upward trajectory and leave behind the interest rate narrative that has been controlling the price movement for quite some time.

The upcoming Federal Reserve Open Markets Committee (FOMC) meeting on Wednesday is expected to confirm market expectations that the Federal Reserve will remain on hold for the rest of the year. This, in turn, is likely to influence gold's performance, finds World Gold Council.

"There is a very high probability of gold prices moving up. Domestic price correction has been overdone due to the rupee strength. Overall, the fundamentals are strong and intact for gold,' said Himanshu Gupta, vice president and head of commodities and currencies research, Globe Capital.

"Our historical analysis shows that when the Fed has shifted from a tightening to a neutral stance, gold prices have increased, even if this effect has not always been immediate. In our view, the combination of range-bound US interest rates, a slowdown in the appreciation of the US dollar and continued market risks will continue to make gold attractive for investors," WGC said.

Historical post-tightening periods have shown an eventual strong gold performance, counterbalancing the performance of risk assets such as stocks or commodities.

Outside the US, the ECB surprised markets in recent months by extending its asset purchase programme; yet unlike US Treasuries, the bond markets in Europe and the UK are still pricing a positive chance of a rate hike this year.