By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Central bank meetings and significant price volatility for precious metals characterized this week. This past week will go down in history as the Swiss National Bank became the first G10 central bank to lower its rate this cycle, at the same time, the Bank of Japan announced its first interest rate raise in 17 years. As expected, the policy rates were left unchanged by the Bank of England and the Federal Reserve. The rate estimates continued to predict three 25bp rate cuts for 2024 following our expectations, notwithstanding the Fed’s suggestion that rate decreases are imminent. For the longer-term “dots” and 2025, and 2026, we revised a little higher. As anticipated, the Bank of England kept the Bank Rate at 5.25%.
Market players believe that the Federal Reserve will start lowering interest rates this year, much like other central banks. The US economy is forecast to grow and inflation is likely to remain sticky, thus rate cuts by the Fed are not anticipated to happen soon. Based on consumer spending and the labour market, the US economy is showing strength, giving the Fed time to gather more information before making any changes.
As the FED maintains hope for three rate cuts in 2024, gold prices reached a fresh high of $2224 (~Rs 66750). The FOMC Statement released this week was neutral – not too dovish and not too hawkish. As was largely anticipated, the Fed did not alter its monetary policy during the meeting in March. Powell hinted that the Fed will soon be seeking to dial down the rate of Quantitative Tightening, though he did not say when. Based on the CME Fed watch tool, traders were pricing in a 74% possibility that the Fed will cut rates for the first time as early as June.
The economic figures for this week show that the housing industry is still a major driver of the U.S. economy’s growth, which is continuing at a steady pace. Both existing house sales and building starts in February exceeded forecasts and increased at strong rates.
Gold prices have corrected and retraced towards $2160 (~Rs 65600) after touching record highs. Strong support lies at $2150 (~Rs 65000), which is likely to act as a base. While Silver is back below $25 (~ 75000) after almost touching the high resistance area of $26 (~Rs 77000). Precious Metals prices are expected to consolidate at this support base level and then again tend higher.
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