Gold and Silver posted one of their strongest weekly gains since January, driven by renewed buying interest and a weak dollar index. A softer dollar makes precious metals less expensive for overseas currency holders, thereby boosting demand.
Spot gold gained 6% on the week, trading near the $4,325 per ounce mark, while silver surged 12% over the same period, quoted near the $64 per ounce level
Meanwhile, oil prices also softened on the day as US President Donald Trump said war could end soon, increasing expectations of the reopening of the Strait of Hormuz. Lower oil prices help ease inflationary concerns, making non-interest-yielding assets like gold and silver more attractive to investors.
“Gold traded with a strong positive bias this week after breaking out of the prolonged consolidation phase witnessed through most of July, where MCX Gold remained largely confined to the Rs 1,40,000–1,45,000 range. The recent rebound indicates renewed buying interest, with the broader trend turning constructive after prices found a strong base at lower levels,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities
Increased expectations of rate hike continue to pressure gold
Despite the weekly gains, markets expect the US Federal Reserve to hike rates at its upcoming meeting. “Gold is a derivative of Fed policy expectations at the moment. The marginal drop in the implied probabilities of Fed rate hikes, along with the belief that Chairperson Warsh may be less of a policy hawk than expected, has driven the metal higher,” Reuters quoted Kyle Rodda, a senior financial market analyst at Capital.com, as saying.
Markets have slightly scaled back on expectations of a rate hike as traders weigh in a 55% probability of a 25 basis point rate hike by the Fed, down from 67% seen last week, according to the CME Fedwatch Tool.
Higher interest rates increase the opportunity cost of holding gold and silver, making interest-bearing assets like bonds and currencies more attractive for investors.
“Bullion may pare some of this week’s gains, with its 50-day SMA potentially offering support, should the U.S. jobs market demonstrate its resilience once more, while adding upside risks to the inflation and Fed rate outlooks,” Reuters quoted Han Tan, chief market analyst at Bybit, as saying
Gold also drew support from continued buying for the fifth consecutive month by China’s central bank. In addition, China’s gold-backed ETFs recorded 14 straight days of inflows through Monday, marking their longest streak since March. China is one of the largest consumers of the precious metals.
MCX Gold and Silver climb
On the domestic front, the gold contract for October was up 1.4% on MCX, quoted at Rs 1,50,910 per 10-gram. While the most-active contract for silver was trading at Rs 2,32,99 per kg in the evening session. “Technically, MCX Gold is expected to trade in the Rs 1,47,500–1,52,000 range over the near term,” Trivedi added.
(With inputs from news agency Reuters)