By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold and Silver prices rebounded last week as dollar was dumped on weak jobless data. Over the past week, which ended on June 3, there were 28,000 more new unemployment claims. With 261,000 Americans currently unemployed, this brings the unemployment rate in the US to a level not seen in almost two years. The US economy appears to be contracting, according to the most recent unemployment figures, which are a sign of a slowing labour market.
Because of the rate decision, the new dot plot, and the updated economic projections, which will provide some insight into the Fed’s reaction function over the coming months, the FOMC meeting on June 13–14 is crucial. Because of the rate decision, the new dot plot, and the updated economic projections, which will provide some insight into the Fed’s reaction function over the coming months, the FOMC meeting on June 13–14 is crucial.
This week, US FED is anticipated to hold interest rates steady at 5.25 percent in order to give the recent 15-month tightening of monetary policy time to take effect. At the time of writing, the CME FedWatch Tool has a 72% chance of a pause. The first ‘on hold’ decision since January 2022 would occur if the FED decides to take a break. Gold prices are encountering strong resistance at $2000 because wealthy traders are avoiding the bullion market while they await the FED’s future monetary policy. When the Federal Reserve has clearly stopped its tightening cycle, gold’s true potential will be revealed.
In addition, prices are being supported by robust central bank demand for gold from emerging economies. The People’s Bank of China announced last week that they purchased roughly 16 tonnes of gold in the previous month. The Chinese government’s central bank has bought gold for seven months running. It has added 144 tonnes of gold to its reserves since November.
The role of gold in foreign reserves is additional evidence of the ongoing trend of dollarization in the world. The U.S. dollar’s share of the world’s foreign exchange reserves has dropped to a record low of 58%, making gold appear to be the biggest winner. In addition, gold now makes up 15% of the world’s reserves, up from 11% five years ago.
The gold market has formed a strong bottom around the level of $1950, which will serve as a solid support. Next support is $1935 (Rs 59200) and $1900 (Rs 58400) and resistance is $2000 (Rs 60400) and $2025 (Rs 61000). Silver is trading rangebound facing strong resistance around $24.15(Rs 73000) and support around $23.5 (Rs 71500).
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