By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold prices reached a new historical high of $2585 (Rs 73500) due to a weaker dollar and increased expectations of a 50-bps rate cut by the Fed. The ECB likewise lowered rates by 25 basis points, as predicted (along with a stagflation reduction to growth and an increase in inflation predictions), but all eyes were on US statistics.
A higher-than-expected PPI, followed by a higher-than-expected core CPI, lowered expectations for rate cuts. The CME’s Fed Watch tool reveals rising market expectations for a more significant rate decrease. The possibility of a 50-basis point decrease next week has risen from 28% to 45% in only one day, with a 55% chance of a 25-basis point drop.
When the Federal Reserve meets next week, it will be faced with a difficult decision to decrease interest rates, given a slowing job market and recent hints of sticky inflation. The US FED is expected to meet next week, with markets divided on a 25 or 50 bps rate cut. Some sticky inflation data revealed this week supported the idea of a modest, 25-bps drop.
Recent statistics have sent contradictory signals about the US economy, and the Fed’s economic forecast, which will be released next week, may confound matters even more. The Fed was “nervous” about maintaining interest rates high for too long, despite accumulating evidence that higher rates were slowing the economy as anticipated. The central bank was still competing for a soft landing, where inflation fell while the labour market remained resilient.
Market players are now focusing their attention on next week’s Federal Open Market Committee meeting. This meeting is shaping up to be one of the most important of the year, with widespread expectations of the first interest rate drop since 2020. Analysts, economists, and market observers agree that a rate cut is almost inevitable.
Gold Weekly Chart
If Gold extends its uptrend, the next resistance would be the psychological key level of $2600 (~Rs 75000) figure. For a pullback, support is $2500 (~Rs 71000). Similarly, for Silver, the next resistance is $32.80 (~Rs 92000).
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