By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
After relatively calm news over the weekend about the Iran-Israel issue, Gold and Silver headed south at the start of the week as global tensions decreased. Gold saw an overdue correction this week, falling below $2300 and over 6% from recent highs, after enjoying safe-haven flows and posting substantial gains for the previous several weeks. Meanwhile, Silver prices have fallen roughly 10% in ten days, from $30 to $27.
The first-quarter GDP estimate was made public by the Commerce Department on Thursday. GDP growth was a dismal 1.6%, far below than the 2.3% average estimate. Opponents contend that because of a high rate of inflation, actual economic growth is probably considerably lower than stated. Although the official GDP number accounts for inflation, real living expenses are typically underestimated, particularly when it comes to housing, food, and energy.
Then, in the first three months of 2024, PCE jumped from 2% in the fourth quarter of 2023 to 3.7%. As inflation figures had a tendency to do in recent months, the spike far above analyst estimates. Many people’s predictions that the Fed will lower rates this year are being cast into doubt by persistently high inflation readings. The Biden administration and those who support it within the central bank will now need to engage in a convoluted political maneuver about how the economy is framed.
Investors will be more lured to precious metals for wealth preservation the more the Fed’s credibility about inflation declines. The markets for gold and silver have had a recent downturn, but overall this year has seen an amazing upswing. The recent surge in gold and silver prices has exceeded even the expectations of many bulls. Prior to the end of April, the $2400 year-end goal price for gold was reached.
Without any assistance from a Fed rate cut, gold shot to fresh all-time highs this year. Despite the constant pushing ahead and dialling down of expectations for rate reduction this year, gold has increased. There’s no reason to assume that rate reduction will end completely and that the precious metals markets won’t be able to rise further. When Jerome Powell and team began hiking rates in 2022, gold prices were lower than they are now. And in terms of declining US fiat currency, there’s good reason to think they’ll keep moving higher in the long run.
From a technical perspective, after this week’s price correction in Gold and Silver, oscillators are in the mid-zone now, after trading in the overbought zone for 20-25 days. As forecasted, Gold and Silver have seen healthy correction after a sharp run. Now further trends would be decided purely on the fundamentals, which are bullish.
Gold bulls need to keep prices above $2365 (~ Rs 71750) for another test of $2415 (~Rs 73200). Weakness below $2315 (~Rs 70800) could open a path towards $2280 (~Rs 69800). While Silver needs to sustain above $27.75 (~ Rs 81500) to head higher towards $29 (Rs 84000) and weakness below $27 (80000) will open the path for $26 (~ Rs 78000).
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