As forecasted last week, Bullion prices will fall till mid-week up to Powell’s testimony and then rise by the end of the week on Nonfarm payroll numbers, price direction has been absolutely as per predicted.
On Wednesday, Powell’s hawkish remarks shocked financial markets and fueled risk aversion, as he stated that the Fed is willing to accelerate interest rate hikes to achieve the 2% inflation target. He agreed that inflation is decreasing, but added that it is still very high. Due to this, US yields rose and gold fell to weekly lows near support levels.
The US Labor Department reported a 21,000 increase in Initial Jobless Claims to 211,000 for the week ended March 4, the highest level since January and the largest increase since October, easing expectations of a more hawkish FOMC on Thursday. Even after the US Bureau of Labor Statistics (BLS) revealed that The unemployment rate increased from 3.4% to 3.6% and Nonfarm Payrolls increased by 311,000 in February, exceeding expectations of 205,000 and confirming January’s shocking numbers, the upward trend continued on Friday.
Meanwhile, physical gold dealers in India were forced to offer discounts this week as purchases slowed as the fiscal year came to a close, while top consumer China saw robust demand. Premiums of $26-$40 per ounce were charged in China over global benchmark spot gold prices, which were on their way down for the week. People bought gold as a hedge against risks such as inflation, which drove up demand for jewellery.
Following a week of hearing FED Chair Powell speak extensively, FED officials will enter a blackout period on Saturday, ahead of the FOMC meeting in March. Expectations regarding what the FED will do at that meeting, as well as the terminal rate, will be a key driver in price action next week. With Powell out of the way and no more Fed talk on the horizon, the focus will shift to US inflation data, which could determine the Fed’s next move. Retail sales figures will also be important.
The annual CPI is expected to fall from 6.4% to 6.2%, while the core CPI will fall from 5.6% to 5.5%. High volatility should be expected in the aftermath of the report. If inflation figures match expectations or show a more significant slowdown, it will cement expectations for a 25 basis point rate hike from the Fed, which will benefit gold and silver bulls. On the other hand, a big surprise to the upside could spark sharp moves, leaving Gold and Silver vulnerable to heavy losses.
Gold and Silver’s prices have retraced to important support levels of Rs 55000 and Rs 62000 respectively as forecasted. As instructed in the previous week, those were the ideal levels for buying. The next move can be an up-move, buying on dips should be a strategy used for the medium term, as the downside seems limited.
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