By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold touched a record high of $2910 (~Rs 85200) as traders reacted to President Trump’s threat of new reciprocal tariffs, enhancing its safe-haven status. Bullion traders have been given a lifeline by US President Donald Trump’s plans to declare reciprocal tariffs on other countries last week after putting a 10% tax on China this week.
Nonfarm Payroll data disappoints.
The US Nonfarm Payrolls employment report for January showed 143,000 new hires, which was less than the 170,000 perceived number for the month, which was 256,000 in December. This reduced the likelihood of a potential third-rate cut in 2025 from the Federal Reserve, which in turn caused some selling pressure on gold.
LBMA update on Dislocation of Gold
There have been numerous discussions of Gold moving to New York from London and the London market’s shortages. The LBMA stated that it still has enough gold to meet the demand for over-the-counter investments, even though there have been large inflows of the precious metal from London into vaults in New York.
London vaults contained 8,535 tons of gold as of the end of January, according to the LBMA’s latest vault holdings report released on Friday. This represents a 1.77% decline from December. The well-established market dynamics at the moment are reflected in the monthly fall in gold stocks. It is not surprising that stocks dropped by 151 tons in January, considering the movement of metal from London to New York.
London’s gold holdings are still strong, but the same cannot be true for silver, which is seeing much larger withdrawals. London vaults had 23,528 tons of silver at the end of last month, according to the LBMA, an 8.6% drop from December.
WGC Gold Demand Trends Report – 2024
Global demand for gold is still strong despite persistent economic uncertainties, according to the World Gold Council’s 2024 Gold Demand Trends study. The main conclusions show that worries about inflation, geopolitical unrest, and market volatility have caused an increase in the demand for investments. Gold ETFs, digital gold, and physical bullion are becoming more and more popular among investors as safe-haven investments, and the demand for jewellery is still high in developing nations like China and India due to their cultural significance and growth.
Central banks have maintained a cautious buying approach, viewing gold as a hedge against currency depreciation and economic instability. Although industrial demand is relatively modest, it shows resilience due to technological advancements in electronics and other sectors. Overall, the report underscores gold’s enduring role as both a store of value and an investment vehicle, with structural trends such as urbanization, demographic shifts, and digital adoption expected to support sustained demand over the medium to long term.
RBI joins monetary easing league
The RBI has joined the top central banks that have eased their monetary policies in support of economic growth by reducing interest rates after a five-year lag. Nonetheless, the Bank of Japan is still raising interest rates, while the US Federal Reserve has halted its easing cycle.
Global headline inflation is expected to drop to 4.2% in 2025 and 3.5% in 2026, according to the IMF’s most recent global economic prediction. The global growth rate, which is 3.3% in both years, is below the historical average of 3.7%. Central banks prioritize growth in the face of uncertainty. The RBI’s key rate is still higher than that of other economies, even with the reduction to 6.25%.
Outlook going forward
This week, investors will continue to evaluate US political headlines. The Chinese Commerce Ministry stated that they will undoubtedly take the required actions to counter unilateral bullying measures in reaction to the US decision to slap tariffs on Chinese products.
The bull run in Gold looks set to continue, with prices likely to hit $3000 (~Rs 87500-88000 at MCX) in February itself, if it sustains above $2900 (~Rs 85000) this week. On the other side, if this rally weakens, we can see profit-booking up to $2800 and $2700.
Gold Apr Futures Daily Chart
For Silver, $33(~Rs 96000) is a very difficult level to crack. If March Future prices don’t sustain above $32, there are high chances of it again retracing back to the $30 (~Rs 90000) floor. And if prices sustain above $33, the next target is $35 i.e. above the 1 lakh level at MCX.
Silver Mar Futures Daily Chart
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