Tensions in the Middle East and Eastern Europe have increased the risk premium on the geopolitical front, which has bolstered demand for safe havens.
Gold Prices Set to Rise
Analysts predict that gold prices will continue to rise over the next week due to a mix of central bank purchases, global monetary easing, seasonal demand in Asia, and ongoing geopolitical uncertainties.
Investors will keep a careful eye on the next trade talks between Washington and Beijing and the US and India, as well as preliminary regional manufacturing and services PMI data. They said that important US macroeconomic data, such as housing statistics, personal consumption spending, and consumer mood, would also influence market sentiment.
Festive Demand Supports Bullion
“The bullion is expected to be supported by strong festive demand in Asia, even if ETFs and central banks are still net purchasers,” said Pranav Mer, Vice President, EBG-Commodity & Currency Research at JM Financial Services. Safe-haven buying is still unequal at the current high prices.
Gold futures for October delivery on the Multi Commodity Exchange (MCX) closed at Rs 1,09,900 per 10 kilos on Friday after rising Rs 1,616, or 1.5%, previous week. Mer said that when attention shifted to the US economic calendar, including the inflation and employment data, gold prices bounced back from a midweek decline and finished the week higher
Fed Cuts Boost Gold
After the US Federal Reserve lowered interest rates by 25 basis points and hinted at two more cuts in the months to come, gold prices have been stabilizing, as stated by Prathamesh Mallya, DVP of Research for Angel One’s Non-Agri Commodities and Currencies. Following the incident, gold prices somewhat adjusted due to an increase in the dollar index.
Nonetheless, he said that the gold markets‘ trajectory is still evident and that their velocity is upward. After reaching an all-time high of USD 3,744 per ounce on Wednesday, gold futures on the global market ended the day at USD 3,705.80 per ounce on Saturday.
Geopolitics Drive Gold
“After hitting record highs, gold saw some profit taking at the beginning of the week, although losses were slight due to the depreciating rupee and poor US employment data. A steep decline in non-farm payrolls, weaker labor market statistics, and higher-than-expected inflation data all affected market sentiment and caused investors to price in at least a 25 basis point decrease, according to Manav Modi, Analyst-Precious Metal-Research at Motilal Oswal Financial Services.
Tensions in the Middle East and Eastern Europe have increased the risk premium on the geopolitical front, which has bolstered demand for safe havens. According to Modi, the precious metal initially fell by about 1% after the decision, but it is now hovering at historical highs as investors consider Fed instructions and geopolitical concerns
Silver Outperforms Gold
Emkay Global Financial Services‘ Research Analyst, Commodities and Currency, Riya Singh, predicted that the yellow metal will rise in the medium run. “USD 3,850–4,000 per ounce is a medium-term aim for gold prices in the international markets, particularly if US inflation continues to fall and Fed cuts proceed as anticipated,” she said. In the meanwhile, due to industrial demand and investment inflows, silver has outperformed gold in recent weeks, showing a stronger trend.
While the white metal increased by about 2% to end at USD 42.95 per ounce on Saturday in foreign markets, silver futures on the MCX concluded at Rs 1,30,096 per kilogram. Earlier in the week, it peaked at USD 43.43 per ounce. Compared to gold, silver has been on a more aggressive course. Due to supply shortages and investor inflows, prices are almost above the USD 43 per ounce threshold, marking the first consistent breach over the USD 40 level since 2011, according to Riya Singh.
Industrial Demand Boosts Silver
One of the main factors driving silver’s rise is its industrial uses. The growth of photovoltaic installations throughout the world has increased demand for solar panel production. In only two years, silver’s portion of module costs has quadrupled, which has tightened the physical market while also causing anxiety among solar manufacturers.
“The double-digit growth in demand from 5G infrastructure, battery storage, and electric cars is countering the reduced demand for jewelry and photography,” she said. Due to low mine output during the last five years and its concentration in a small number of areas, the market is susceptible to disruptions. Singh said that in the near future, silver prices in international markets may reach USD 49–50 an ounce in the next months.
Silver Prices Likely Rise
JM Financial Services‘ Pranav Mer shared similar opinions, predicting that the price of silver might rise to between Rs 1,40,000 and Rs 1,50,000 per kilogram on the domestic market.
Bullion markets seem set to maintain their pace in the next weeks as the US Federal Reserve signals a weaker policy stance, global demand drivers are becoming stronger, and Asian seasonal purchasing is under way. Analysts warn, meanwhile, that given the interaction of US data releases, currency fluctuations, and geopolitical events, volatility may continue.