Gold prices in India rose on Tuesday, with the price per gram reaching 8,136.41 Indian Rupees (INR), up from INR 8,136.38 on Monday. The price per tola also increased to INR 94,901.45 from INR 94,612.61 a day earlier. This rise comes amid falling US yields, with the US 10-year Treasury bond yield dropping nearly nine basis points to 4.218% as traders anticipated Federal Reserve interest rate cuts.
As measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) yield, US real yields declined five-and-a-half basis points to 1.906%, provide support for the non-yielding metal. Fed Chair Jerome Powell recently reiterated that the central bank is not hurrying to lower rates, emphasizing that achieving a 2% inflation target would be bumpy and that the Fed does not need to overreact to one or two readings. The New York Federal Reserve Consumer Sentiment Survey revealed that inflation expectations for one year in February increased slightly from 3% to 3.1%, while expectations for three and five-year periods remained unchanged at 3%.
Americans continue to anticipate price increases in gas, rent, and food. The February US jobs report was mixed. The economy added over 150,000 jobs, but the unemployment rate rose to 4.1%. However, the data indicates that the labor market remains solid.
On an international scale, the People’s Bank of China (PBoC) continues to bolster its gold reserves. According to the World Gold Council (WGC), the PBoC increased its holdings by 10 tonnes in the first two months of 2025.
Gold prices rise on US yields
Meanwhile, the National Bank of Poland (NBP) made the largest purchase, increasing its reserves by 29 tonnes. Gold has played a significant role in human history as a store of value and medium of exchange. Apart from its appeal for jewelry, gold is seen as a safe-haven asset, especially during turbulent times.
It is also considered a hedge against inflation and depreciating currencies, as it does not rely on any specific issuer or government. Central banks are the largest holders of gold, often purchasing it to support their currencies in turbulent times. Central banks from emerging economies such as China, India, and Turkey are rapidly increasing their gold reserves.
Gold is inversely correlated with the US Dollar and US Treasuries. When the Dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets in uncertain times. Gold is also inversely correlated with risk assets like stocks.
Various factors can influence gold prices, including geopolitical instability and recession fears. Gold tends to rise with lower interest rates as a yield-less asset, whereas higher money costs usually weigh it down. Most movements depend on the behavior of the US Dollar, as gold is priced in dollars (XAU/USD).
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