Global bullion market witnessed volatility in the first week of July as the market waited for key economic data, especially the Non-Farm Payroll and Unemployment Rate data. Gold prices declined after US President Donald Trump had agreed not to impose additional tariff on Chinese goods. However, the fall was short-lived as the focus of the market shifted from trade conflict to the Fed Reserve interest rates. In June Fed meeting, the US central bank had hinted at cutting interest rates in their policy meeting in July end. Non-farm payroll data is a key factor for the Federal Reserve to cut interest rates. This data was better than expected at 224,000 in June as against May month’s revised data of 64,000 and beating market expectation of 160,000. Since the data was better than expected, the probability of rate cut is lowered thereby pushing the gold prices to higher levels.
On the domestic front, Indian bullion market was expecting some relief in the Union Budget 2019 in the form of cutting import duty on gold. In her maiden Budget speech, finance minister Nirmala Sitharaman had raised import duty on gold and other precious metals from 10% to 12.5%. The industry was demanding that the import duty be kept at 4% instead of 10%. However, the government had raised the duty. After this announcement, the gold in MCX hit an all time high of Rs 35,100 per 10 grams. In our annual report on commodity and currency released in the month of January 2019, we had predicted that CME gold is likely to test $1,370 per troy ounce initially and later it will rally to $1,500 per troy ounce. On MCX, our initial target was Rs 33,500 and then Rs 36,500 per 10 grams. As expected, the market had moved in similar direction by achieving first target and is heading for next level.