While Makar Sankrant marks a pause to festive celebrations, on the other hand Raksha Bandhan marks the onset of the festive season in India.
Gold is sensitive to higher rates which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. The week has seen a run of mixed signals from Federal Reserve policymakers.
San Francisco Fed President John Williams on Thursday joined a growing chorus of his colleagues signalling support for a U.S. interest rate hike in coming months. New York Fed President William Dudley reinforced his confidence in a possible rate hike for a second time in the week. Dallas Fed President Robert Kaplan, however, saw limited room to manoeuvre on rates.
US Dollar- The dollar against a basket of six major currencies was up about 0.27 percent at 94.414. The current ‘ultra low’ interest rate environment has sent global investors on a search for yield. Hence any prospect of an interest-rate increase in the U.S. makes U.S. dollar investments more attractive to international investors, leading to an increase in the value of the U.S. dollar vs. other currencies across the globe.
The U.S. dollar, after tapping a seven-week low this week, strengthened Friday, cutting demand for precious metals, which are priced in the currency.
ECB- Meanwhile, European Central Bank rate setters agreed not to discuss any policy change at their July meeting and to keep market hopes for more stimuli in check, minutes showed on Thursday.
U.S. Jobs report– Reports showed the number of Americans filing for unemployment benefits fell more than expected last week, while manufacturing activity in the U.S. Mid-Atlantic region saw a mild improvement this month. Members of the Fed’s rate-setting Federal Open Market Committee were generally upbeat about the U.S. economy and labour market, but several said any slowdown in future hiring would augur against a near-term rate hike. U.S. economic data will continue to offer clues on the Fed’s next move. Fed Chairwoman Janet Yellen will also speak at a conference in Jackson Hole, Wyo. next Friday. Admittedly, a very strong U.S. labour market report in early September could already be enough to prompt the Fed to hike interest rates next month.
Still range bound, gold looks to break through USD $1,360 as the possibility of a September rate rise tempers.