By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Last week’s central theme was US inflation data, which caused the Dollar Index to hit a 15-month low and inturnincreased the price of precious metals. Last week, the CPI and PPI both decreased more than anticipated. The annual increase in consumer prices was 3%, the smallest since March 2021. In the same month, core inflation increased by 4.8% for the year.
Traders questioned whether the FED would have enough motivation to carry out two additional rate hikes this year in light of the decline in U.S. inflation. Markets are betting that the FED‘s rate hike later this month, which is widely anticipated, will signal the end of the current cycle of rate increases.
Because higher rates increase the opportunity cost of holding non-yielding assets, such a scenario is favourable for precious metal prices. With prices ending the week up more than 8% above $25/oz (~ Rs 75000), Silver is the metal receiving significant attention. Silver is starting to experience relief from its two headwinds.
As the Federal Reserve nears its peak rates, silver is gaining from changing expectations for monetary policy. However, the economy has remained fairly resilient even in this environment of aggressive monetary policy, supporting the industrial use of silver. If the Federal Reserve can thread the needle and achieve a soft landing, silver should perform better than gold.
Gold has crossed the important resistance of $1950 and the next immediate resistance is at $1968 (~Rs 59400) & $2000(~Rs 60400) and support is at $1930 (~ Rs 59000) & $1900 (~ Rs 58000). Similarly Silver has crossed the important resistance of $25 (~ Rs 75000) and the next level to watch for is $26 (~Rs 78000). It seems Silver could outperform Gold and cross-record high prices in India and touch the Rs 80000 level in the next few trading days.
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