By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold gained bullish momentum and surged above $2400 (Rs 73000) on broad-based USD weakness. A strong decline in US yields coincided with the US Dollar Index meeting extra downside pressure and plunging to five-week lows below the 104 zone.
Federal Reserve Chairperson Jerome Powell told the Senate Banking Committee during his two-day Congressional testimony last week that more positive data would strengthen their confidence in inflation and reiterated that it would not be appropriate to lower the policy rate until they have more confidence.
The US Bureau of Labor Statistics reported that inflation in the US, as measured by the change in the Consumer Price Index softened to 3% yearly in June. Due to this, traders were seen pricing in an over 82% chance for a 25-basis point cut in September, up from last week’s chances of about 64%.
Technically Gold prices have given a bullish breakout of the triangular pattern and given a weekly closing above it. This opens the door for extra gains towards the previous high of $2450 (Rs 75000) and more in the coming days if momentum builds on.
Gold Weekly chart
Demand has surpassed supply for the fifth year in a row, with 64% of global silver demand coming from the industrial sector, which is driven by green energy, artificial intelligence, and electric vehicles.
The only concern has been a recent decline in Chinese demand and the potential for a slowdown in the Chinese economy, which could help balance the supply and demand gap. Prolonged higher interest rates from Central Banks could also dampen silver prices and potentially halt the rally. The sooner the US Federal Reserve cuts rates, the better for silver prices.
From a technical standpoint, silver has broken out of a bullish pennant pattern, which led to a rally up to around $31.5 before entering a pullback and consolidation phase. This opens the door for Silver towards the previous high of $32.5 (Rs 96000) and higher if momentum builds on.
Silver Weekly chart
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