By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold gained positive traction and surged beyond $3400 to close the week up 1% on a solid foundation. With a 3% gain, silver outperformed its golden counterpart, causing prices to rise above the psychologically significant $39 mark. In contrast to isolated volatility, this convergence points to continuous momentum.
Markets were expecting a dovish tone from Federal Reserve Chairman Jerome Powell’s much-anticipated speech at the Jackson Hole Economic Symposium, which caused major swings in the currency and commodity markets. Powell gave traders the security they needed about the direction of the Federal Reserve’s monetary policy with his well-chosen wording, especially by indicating that interest rate cuts are probably going to start next month.
Powell has hinted at a rate cut at the September meeting, but if inflation pressures keep increasing, that stance may become more difficult. With price risks now skewed to the upside and employment risks to the downside, Powell continued, the US economy is in a “challenging situation.” Powell also stated that there were increasing negative risks to the labour market, but he also noted that it would be realistic to anticipate that the effects of tariffs on inflation would be temporary.
Market positioning indicates that even if Fed officials confirm a rate reduction at the next meeting, the USD may still struggle to find demand as investors position themselves for a policy shift toward steady easing in the final quarter of the year. The CME FedWatch Tool indicates that markets are pricing in about a 90% probability of a 25 bps rate cut in September following the Jackson Hole Symposium.
Precious metals were further supported by political uncertainties regarding Federal Reserve independence, in addition to Powell’s dovish remarks. There are now further worries about possible political meddling in monetary policy choices after President Trump declared he would fire Fed Governor Lisa Cook if she did not step down. Because of this uncertainty, investors have historically gravitated toward safe-haven assets, which has given gold prices a solid foundation.
Precious metals are in a particularly good position for a bullish rally due to the combination of dovish Federal Reserve policy signals, political unpredictability, dollar weakness, and strong equity market performance. Gold’s comeback above important technical levels points to a resurgence of institutional interest, while silver’s superior performance amidst generally connected movement patterns suggests future strength.
Recent data indicates that China’s solar cell exports increased by almost 70% in the first half of the year due to strong photovoltaic demand from India, which is helping silver on the industrial side. Ahead of regulation changes that would make it more challenging to connect new solar panels to the grid, China added over 93 gigawatts of solar power in May, setting a record and increasing by 300% year over year.
For next week, the preliminary reading of the US GDP for the second quarter, which is scheduled for release later on Thursday, will be watched by gold speculators. In Q2, it is anticipated that the US economy will expand at a 3.0% yearly rate. Should the result be more robust than anticipated, this might strengthen the Greenback and affect the price of commodities priced in USD.
Economic Calendar for this week
Gold Oct Futures are expected to continue their upside momentum towards $3500 (~Rs 102,000), if it sustains above $3425 (~Rs 100,500).
Gold Oct Futures Daily Chart
As Silver has broken its range and sustained above $38.80 (~Rs 116,000), upside momentum can swing prices towards a new high of $40 (~Rs 120,000) this week.
Silver Sep Futures Weekly Chart
Silver prices have given an upside breakout of their range above $37.5 (~Rs 110,000). This bullish momentum is expected to extend further towards $40 (~Rs 115,000) and $41 (~Rs 118,000).
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