Gold hit a record high above $3550 (~Rs 105,000), as increased bets for a U.S. Federal Reserve interest rate cut this month lifted bullion’s allure, while silver also rose to a record high to trade above $41.5 (~Rs 122,500).
Demand for safe havens has increased as a result of President Trump’s historic attempt to oust Governor Lisa Cook, which has sparked worries about the loss of central bank authority. Meanwhile, prospects of a more relaxed monetary policy in the future are strengthened by Fed Chair Jerome Powell’s dovish remarks at Jackson Hole, which indicated that circumstances “may warrant” interest rate decreases. Keeping investors on edge and causing some safe-haven flows into gold, a court hearing on Cook’s motion to temporarily halt her removal ended without a decision on Friday.
After gaining 3.4% in July, the US dollar index reversed course and ended August down 2.2%. Gold becomes more affordable for overseas customers when the value of the dollar declines. However, there is a chance that rate cuts will reduce the opportunity cost of gold holdings. In a low-rate economy, gold becomes more appealing.
President Donald Trump’s reciprocal tariffs were declared unlawful by a federal appeals court on the trade front, and the government has until October 14 to file an appeal with the US Supreme Court. In the meantime, Gold was further bolstered by Trump’s fresh tariff threats. Speaking late Tuesday at a cabinet meeting, President Trump threatened to impose up to 200% tariffs on China unless it supplied the US with magnets.
According to New York Fed President John Williams, the US economy is “slowing, not stalling,” as hiring momentum has slowed and GDP growth has slowed to between 1% and 1.5%. He emphasised that interest rates are still above neutral and that policy is still in a “modestly restrictive” stance. He also reaffirmed that if the economy develops as anticipated, interest rates will eventually need to approach neutral, which means that someday, cuts may be justified.
A new 25% charge that targets a variety of products, from textiles and footwear to jewellery and chemicals, caused US tariffs on Indian imports to increase to 50% on Wednesday. In an effort to exert pressure on India for its ongoing imports of cheap Russian oil, the action places over half of India’s $87 billion in yearly imports.
Furthermore, on Thursday, Russia conducted its second-largest aircraft assault since its full-scale invasion of Ukraine, causing damage to the European Union headquarters and reportedly killing 23 people, including four children. Due to this event, market expectations for a peace deal between Russia and Ukraine were lowered, which allowed Gold to profit from safe-haven flows.
The United States’ annual inflation rate, as determined by the change in the PCE Price Index, remained stable at 2.6% in July, according to the country’s final significant data release of the week. Following June’s 2.8% gain and in line with analyst estimates, the core PCE Price Index—which does not include volatile food and energy prices—rose 2.9% for the same time frame. Gold continued to rise as a result of these numbers since there was no discernible market reaction. Participants in the market will keep evaluating the geopolitical developments. Gold might continue northward momentum if tensions between Russia and Ukraine continue to be elevated, at least until the US employment report takes over as the key market driver.
Gold Oct Futures Daily Chart
If macroeconomic risks remain elevated, gold prices could feasibly target $3700 (~Rs 1.10 lakh) in the next few weeks in September and $4000 (~Rs 1.20 lakh) in the next few months by the end of 2025.
Silver Nov Futures Daily Chart
Silver, after breaking $40 resistance, can continue its northward journey towards $43 (~Rs 1.30 lakh) in the next few weeks in September and $45 (~Rs 1.35 lakh) in the coming few months before 2025 ends.
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