Gold goes up to the two week high due to the expectation of rate cut

Gold prices hit a two-week high of $2,366, driven by rate cut speculation after the Swiss National Bank's unexpected move. Weak US economic data and a weaker Rupee contributed to the surge, despite a stronger dollar and higher yields.

The spot gold prices went up to $ 2366 an ounce, the highest for two weeks on Thursday, because of the rising probability of rate cuts by the Fed, following the Swiss National Bank’s move to trim its interest rates for the second time consecutively.

1. Weak US economic data: Some recent indices indicated that housing starts in the US, the weekly jobless claims, and the outlook of the Philadelphia Fed Business index are lower suggesting that rate cuts are needed.

2. Swiss National Bank's move: This decision by the Swiss National Bank has forced other global central banks to follow suite after reducing its interest rate.

3. Fed rate cut probability: Market now is now anticipating a 65% probability of a Fed rate cut in the next meeting that is set for September 18.

4. Currency movements: Gold can also be seen as having risen at a time when the US Dollar Index was higher and US Treasury yields were higher as well. Moreover the rupee fell against the dollar which in turn increased the gold price on the Multi Commodity Exchange (MCX) of India.

There are other analysts who expect gold to possibly test $2,385, and even $2,400 in the short-run. The former acknowledges the fact that data volatility could lead to high fluctuation in the price in the short run.

The safe-haven asset status of the metals has been strengthened by political events like the recent elections in Europe where far-right political parties fared well.

As per the MCX closing price, the spot gold was at $2,356 although almost 1. 30% on the day. The August contract of the MCX was at Rs 72,597, a 1% increase. 21% increase.

Also Read: Gold rate down by Rs 100 and Silver down by Rs 300 on June 19

As for the subsequent clues to the gold prices and the Fed actions, it will be crucial for investors and traders to focus on the next US economic data including manufacturing and services PMIs, existing home sales.