Gold Prices Rally On Fed Cut Bets, US Shutdown Concerns: What Indian Investors Need To Know
Gold prices have been on a five-day rally, reaching successive records, as the US government shutdown begins and traders add to bets on Federal Reserve interest-rate cuts. This rally has been supported by central-bank buying and rising holdings in gold-backed exchange-traded funds, as the Federal Reserve resumed interest-rate cuts.
Understanding The US Government Shutdown
The US government shutdown has begun, and this has significant implications for the global economy. The shutdown is expected to create a blackout in crucial economic figures that the Fed needs to make rate decisions. This has left economists, traders, and policymakers more reliant on non-government data, such as the ADP Research print, which showed a sharp decrease in private-sector payrolls in September.
Impact On Gold Prices
The shutdown has also increased pressure on the dollar, which has boosted gold prices. Traders have added to bets that the Fed will cut rates twice more this year to support a weakening labor market. Lower borrowing costs tend to boost non-yielding gold, which also becomes cheaper for most buyers when the greenback softens.
Gold ETF Inflows On The Rise
Monthly ETF inflows in September were the largest in three years, according to data compiled by Bloomberg. Chinese buyers were also scooping up more gold-backed funds, with the four most popular registering inflows last month following a period of tepid demand.
Why Gold Is A Haven Asset
Gold has also drawn haven demand amid mounting concerns about the Fed’s independence. On Wednesday, the US Supreme Court refused to allow President Donald Trump to immediately oust Fed Governor Lisa Cook while she sues to keep her job — dealing a setback to his efforts to exert more control over the central bank.
What This Means For Indian Investors
For Indian investors, the rally in gold prices presents an opportunity to diversify their portfolios. Gold has traditionally been a safe-haven asset, and its prices tend to move inversely to the stock market. With the US government shutdown and the Fed’s interest-rate cuts, gold prices are expected to remain buoyant in the near term.
Indian investors can consider investing in gold through various options, such as gold ETFs, gold mutual funds, or physical gold. However, it’s essential to keep in mind that gold prices can be volatile, and investors should have a long-term perspective when investing in gold.
Conclusion
In conclusion, the rally in gold prices presents an opportunity for Indian investors to diversify their portfolios. With the US government shutdown and the Fed’s interest-rate cuts, gold prices are expected to remain buoyant in the near term. However, investors should keep in mind that gold prices can be volatile, and it’s essential to have a long-term perspective when investing in gold.
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Frequently Asked Questions (FAQs)
- What is the current trend in gold prices and what is driving it?
Gold prices have been on a five-day rally, driven by central-bank buying, rising holdings in gold-backed exchange-traded funds, and bets on Federal Reserve interest-rate cuts amid the US government shutdown. - How does the US government shutdown impact the global economy and gold prices?
The shutdown creates a blackout in crucial economic figures, increasing pressure on the dollar and boosting gold prices, as traders add to bets that the Fed will cut rates to support a weakening labor market. - What is the significance of gold ETF inflows and how do they relate to gold prices?
Monthly ETF inflows in September were the largest in three years, indicating increased demand for gold, which has drawn haven demand amid concerns about the Fed’s independence and mounting economic uncertainties. - Why is gold considered a haven asset and what does it mean for Indian investors?
Gold is a safe-haven asset that tends to move inversely to the stock market, making it an opportunity for Indian investors to diversify their portfolios, especially during times of economic uncertainty. - What options are available to Indian investors to invest in gold and what should they keep in mind?
Indian investors can invest in gold through gold ETFs, gold mutual funds, or physical gold, but should keep in mind that gold prices can be volatile and it’s essential to have a long-term perspective when investing in gold.
