By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Last week was rather quiet in terms of macro data, but central bankers delivered some hawkish signals ahead of the January rate decision. The Fed’s Waller remained convinced that sustainable 2% inflation is within striking distance, but he also stressed that there is no urgency to drop rates as soon as in the past. The hawkish turn in U.S. monetary policy caused gold prices to plummet to a five-week low of just around $2,000 (~Rs 61400). According to the FedWatch Tool provided by CME Group, the probability of the rate cuts decreased from more than 80% last week to a little over 46% this week.
Furthermore, shortly before the ECB’s silence period, Lagarde stated that rates will likely be slashed only in the summer, and Knot cautioned that markets have been ‘getting ahead of themselves’. On the geopolitical front, the deterioration of the Israel-Hamas conflict, the Red Sea issue, and the involvement of significant countries as this situation continues to expand are elements that promote additional demand for the yellow metal.
Gold investors will need to keep a careful check on the US dollar as it continues to influence the precious metal’s price movement. The US dollar may see some volatility this week as three major central banks make monetary policy decisions. The Bank of Japan will be the first to bat, and it is expected to continue its dovish approach and negative interest rates. The Bank of Canada is next in line, and with the unexpected spike in inflation in December, the central bank faces a more difficult route. Thursday, the European Central Bank concludes the week and poses the highest risk to the US dollar and gold.
Solid physical demand in Asian markets continues to sustain the precious metals market at lower prices. The Chinese New Year, a crucial occasion for purchasing gold, begins on February 10. Despite, or possibly because of, China’s slowing economic recovery, Chinese investors are doubling down on this safe-haven asset.
The short-term view looks negative for Gold and Silver due to the central bank’s hawkishness. If gold sustains below $2010 (~Rs 61700), it is likely to fall towards $1975 (~Rs 61000). While if Silver prices sustain below $22.60 (~Rs 71500), it can fall to $22 (~Rs 70000) support.
Disclaimer: This report contains the opinion of the author, which is not to be construed as investment advice. The author, Directors, and other employees of Augmont Enterprise Private Ltd. and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The opinions mentioned above are based on information, which is believed to be accurate, and no assurance can be given for the accuracy of the information. The author, directors other employees and any affiliates of Augmont Enterprise Private Ltd cannot be held responsible for any losses in trading. In no event should the content of this research report be construed as an express or implied promise, guarantee or implication by or from Augmont Enterprise Private Ltd. that the reader or client will profit or the losses can or will be limited in any manner whatsoever. Past results are no indications of future performance. Information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. The information contained in this report is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purposes and are not to be construed as investment advice