US Fed impact: Gold prices hit new high, bond yields dip below 7% before pulling back

The US Federal Reserve’s decision to raise interest rates by 25 basis points even as it hinted at a pause ahead weighed on sentiment in India’s money, stock and bullion markets on Thursday. While MCX gold prices hit a new high with the June contract touching 61,490 per 10 grams, the benchmark 10-year government bond yield briefly fell below 7 percent on Thursday morning.

Meanwhile, the stock market rebounded, with the NSE Nifty 50 index ending the day at 18,255.80, up 165.95 points, or 0.92 percent, and the BSE Sensex index rising by 555.95 points, or 0.91 percent, to 61,749.25.

This comes after the US Federal Open Market Committee meeting on Wednesday raised the federal funds rate by 25 basis points to a range of 5 percent to 5.25 percent, the highest level since September 2007. Fed Chairman Jerome Powell said The question is now open whether further increases would be warranted in an economy that still faces high inflation but is also showing signs of slowing and the risk of a credit crackdown by banks is on the horizon.

gold glitter

While gold prices gave some gains to close at $61,366, the yellow metal’s spot market prices also rose $602 per 10 grams to $61,646 from the $61,044 recorded on Wednesday, according to data from the Indian Bullion and Jewelery Association. Comex spot gold touched a high of $2,082 an ounce late Wednesday night.

is reading: Bullion Signals: Gold and Silver are lacking direction

Ravindra V. Rao, vice president of commodity research, Kotak Securities, said gold prices may continue to rise amid prospects of an imminent US recession, stresses in the banking sector, and uncertainty about the debt ceiling.

is reading: Gold shines while inflation prevails

G-Secs pool

In the financial market, Government Securities (G-Secs) continued to rally, with yields on the benchmark 10-year bond Thursday briefly falling below 7 per cent before easing even as the repurchase price spread compressed below 50 basis points. , albeit only for a short time.

is reading: How good is G-Sec as an investment option?

Although the return on the benchmark 7.26 percent 2033 G-Six fell to 6.9786 percent, the lowest level in nearly 13 months, it could not be sustained as market players felt that investors’ appetite would be constrained at current levels. G-Sec has been rising over the past month, with yields closing at a 13-month low on Wednesday, coinciding with movement in US Treasury yields. Since April 6, when the MPC voted unanimously to keep the policy repo rate unchanged at 6.50 per cent, the yield of the 10-year G-Sec standard has fallen by 27 basis points, with its price rising to ₹1.91. The benchmark GSec yield on Thursday ended slightly higher at 7.014 per cent (previous close: 7.0057 per cent). The price of this security fell 6 baisas at INR 101.70 (INR 101.76).

At GSecs weekly auction, the benchmark 10-year note sold at a slightly higher yield of 7.0381 percent versus the previous closing yield of 7.0057 percent. Market players attributed this to weaker than expected demand.

In stock markets, the US Federal Reserve’s softening of its stance on prospects for future interest rate hikes encouraged investors’ mood, leading to a new wave of buying in bank stocks. With India’s growth indicators showing good signs of recovery and crude oil prices continuing to drop, investors are betting heavily on local stocks even as the haze persists over global economic growth. Technically, Nifty cleared the 18150 resistance mark, and after the breakout, the positive momentum intensified. The indicator also formed a long bullish candle, which supports further upside from current levels. As long as the index is trading above 18150, the uptrend wave is likely to continue till 18350-18400.” Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd. said.