Last Updated:
Gold reached a record level of $4255.04 and silver reached a record level of $57.86. The market remains bullish on expectations of a possible rate cut by the Federal Reserve and new leadership.
New Delhi. Gold prices were seen rising sharply this week. In the global market, spot gold increased by 0.6 percent to $ 4255.04 an ounce, which is the highest level in the last 6 weeks. February futures gold also rose to $4290.40. Silver surprised the market even more and touched the all-time record of $57.86 per ounce and traded back at $57.63.
This jump in rates is also important because investors are confident that the US Federal Reserve can cut interest rates this month. On top of that, new leadership is expected to come to the Fed, which the market is considering as dovish, i.e. a team that is in favor of low interest rates. This has had a direct impact on non-yielding assets like gold and silver.
Bets on Fed’s policy increased further
US data has been soft in the last few weeks and many top policymakers have also been seen leaning towards lower interest rates. Fed Governor Christopher Waller and New York Fed President John Williams indicated in recent speeches that the pressure has eased. For this reason, the market has now priced in 88 percent chance of a rate cut in December. Low borrowing cost is always considered a positive for gold as it is an interest-free asset.
Who is the new head of Fed?
Political signals are also writing a new story on who will be the next chairperson of the Federal Reserve in America. White House economic advisor Kevin Hassett said that if he gets a chance, he is ready to play the role of Fed Chair. It is believed that former President Donald Trump can finalize the new name before Christmas. Trump himself has repeatedly said that rates should be reduced. The market feels that the pace may increase further with the arrival of new leadership.
Dollar weak and industrial demand expectations
The dollar is currently at a two-week low. If the dollar weakens, gold becomes cheaper for investors in other countries. This is the reason why purchases increase and prices go up. According to UBS analyst Giovanni Staunovo, gold is strong because investors can also see a level of $ 4500 per ounce next year. At the same time, silver also gets support from industrial demand, especially when expectations of improvement in the manufacturing cycle are increasing. UBS estimates that silver may go up to $ 60 an ounce next year.
Overall, the market is now eyeing two big data points. November’s ADP employment data will come on Wednesday and the core PCE report at the end of the week. If both the figures remain weak then Fed’s rate cut possibilities will become stronger and the rally of gold and silver may last longer. At present the environment seems completely in favor of commodity bulls.
