*What is Expected from Gold?*
Over the last six months, we have allocated gold to many clients based on two key expectations:
-*Interest Rates Decline*
-*Dollar Depreciation Against the Rupee*
*Current Situation:*
-The interest rate cut has begun, with the U.S. reducing rates by 50 basis points last month.
-Gold has performed well in response to this news.
-However, dollar depreciation against the rupee has not yet occurred. In fact, the dollar has been appreciating.
*Reasons for Dollar Appreciation:*
1. Dollar Strength Against the Rupee:
-Slower-than-expected FII (Foreign Institutional Investors) flows into India.
-China attracting a portion of FII allocation, diverting funds away from India.
-Consistent FII selling of Indian equities, leading to dollar outflows from India, thus increasing the dollar's value against the rupee.
2. Dollar Strength Against Global Currencies:
-Hawkish Fed comments about inflation, signaling that rate cuts may be slower going forward.
-Although a rate cut of 50 bps occurred, inflation remains high, and the Fed may slow down future cuts.
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