Gold sees notable rally amid rising expectations of US Fed rate cut
The price of 24-carat gold (10 grams) surged by Rs 1,324 over the week, supported by safe haven buying and surging expectations of US Federal Reserve rate cut.
The price of 10 grams of 24-carat gold closed the week at Rs 1,26,666 -- up from Rs 1,25,342 at the end of Monday, according to data published by the India Bullion and Jewellers Association (IBJA).
The probability that the Federal Reserve would lower rates by 350 to 375 basis points at its December monetary policy meeting has risen to 86.9 per cent from 71 per cent a week earlier, according to the CME FedWath Tool.
Analysts said that gold has retested resistance in the $4,215 to $4,240 zone and needs a solid trigger to climb above $4,240.
They added that a sustained climb could target the prior record high of $4,400 (Rs 131,500), while a drop could see a retreat to $4,100 (Rs 123,000).
The yellow metal however declined on Friday after the end of the US government shutdown, which in turn faded concerns about economic disruption.
Analysts said that gold has support at Rs 1,25,750-1,24,980 per 10 gram zones while resistance at Rs 1,27,750-Rs 1,28,400. Silver has support at Rs 1,60,950-Rs 1,59,400 per kg while resistance at Rs 1,63,850-1,64,900.
Analysts forecasted the current softness in bullion to continue in the near term, until there is a renewed surge in safe haven buying or a clear shift in the Federal Reserve’s policy tone.
Bank of America earlier this week said that gold could touch $5,000 with macro tail winds such as elevated government debt levels, persistent inflation, lower interest rates, and unconventional US economic policies.
They noted that institutional allocations remain relatively light even as prices climb.
Slowing demand from China, supply constraints in key mined metals and low global inventories are other key watch points, according to the bank.
