Gold prices touched the record high above $3840 (~Rs 115,900), and Silver rose above $47.40 (~Rs 144,000) rising almost 9% given the uncertainty surrounding US tariffs, the potential shutdown of the US government this week, and the expectation that the Fed will lower interest rates by an additional 50 basis points this year, precious metals continue to get safe-haven support.
Unless Congress can come to a financial agreement before the new fiscal year begins on October 1st, the federal government is once again in danger of shutting down. We are expected to retest another record high this week, and sentiment is extremely positive. It is possible to argue that the current long position of the gold and silver markets is a reason to be cautious about potential future gains.
In addition, despite the dollar’s recovery and Treasury yields’ recovery, demand for safe-haven assets has increased due to geopolitical threats and global trade tensions, offsetting the Federal Reserve’s less dovish view. After the Administration adopted a more assertive stance against Russia by implying that Ukraine could reclaim land lost since Russian soldiers invaded, Bullion also gained ground.
When the US presidential administration announced plans to put harsh taxes on patented pharmaceutical products and other medical equipment, it rekindled worries about restrictive trade policies. US President Donald Trump announced that he would implement tariffs starting on October 1st, which would include 25% on heavy-duty trucks, 50% on kitchen cabinets, 30% on upholstered furniture, and 100% on imported branded medications.
In September, $10.5 billion was invested in gold exchange-traded funds. About $50 billion has been transferred to ETFs so far this year. Over two-thirds of economic activity is derived from consumer expenditure in the United States, which increased by 0.6% in August, just exceeding the 0.5% forecast. The United States economy grew 3.8% faster than anticipated in the second quarter, according to US GDP data released on Thursday. At the same time, weekly unemployment claims decreased.
The Fed’s favoured inflation indicator, the Personal Consumption Expenditures Price Index, increased 2.9% last month as anticipated. Despite personal income and spending being a tenth over forecasts, the monthly and annual PCE numbers are consistent. The Fed may still proceed with another cautious rate drop at its October meeting despite this data. Investors now see an 88% probability of a rate cut in October and a 65% chance of another in December, according to the CME FedWatch Tool.
The US data calendar for Thursday, which includes the release of the weekly initial jobless claims and the Philadelphia Fed Manufacturing Index, is now anticipated by traders as a source of stimulation later in the North American session. Aside from this, the Bank of England policy update may cause some volatility and have an impact on precious metals before Friday’s pivotal Bank of Japan monetary policy announcement.
Gold Dec Futures has given a breakout above its previous week’s high of $3825 (~Rs 115,000), the next target would be $3900 (~Rs 117,500) and $4000 (~Rs 121,000). If prices top out and fall below $3750 (~Rs 113,500), then only we could see further profit booking.
Silver Nov Future prices continue their parabolic run, and this rally seems to stop at $50 (~Rs 150,000). One needs to be cautious on the buy side. If prices top out and fall below $46.30 (~Rs 141,500), then we can see profit-booking.
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