MCX gold and silver touched lifetime high points on Thursday, May 4, with silver futures reaching a peak of Rs 78,791 per kilogram and gold futures reaching Rs 61,845 per 10 grams. Silver beat its previous high from August 2020 of Rs 77,949. Each precious metal hit lifetime highs following Wednesday’s Federal Reserve meeting.
On May 3, commentary from the U.S. Federal Reserve committee meeting hinted at future rate interest rate hike pauses. “In light of these uncertain headwinds along with monetary policy restraint, we’ve put in place, our future policy actions will depend on how events unfold,” Jerome Powell, a committee member of the Fed, explained during the meeting.
“The assessment of the extent to which additional policy firming may be appropriate is going to be an ongoing one, meeting by meeting,” he continued. “We have to balance the risk of not doing enough and not getting inflation under control against the risk of slowing down economic activity too much. And we thought that this rate hike, along with the meaningful change in our policy statement, was the right way to balance that.”
Previously, analysts expected to hear about more consistent rate hikes continuing throughout 2023 after previous statements of “some additional policy firming.” Now, Powell revealed, “If you add up all the tightening that’s going on through various channels, we feel like we are getting closer, or maybe even there. We’ve moved a long way fairly quickly. And we can afford to look at the data and make a careful assessment.”
The above commentary, combined with heightened banking fears that the Federal Reserve could not ease, gave further rise to the already soaring precious metals. All eyes were on this meeting to see whether interest rates would continue soaring throughout the year, and the answer is now clear. With this answer, investors flocked toward the stable precious metals.
“With this strong momentum, gold is on track for its highest weekly rise in almost two months, as anticipation of a pause in the U.S. Federal Reserve’s rate hiking cycle and banking concerns boosted the safe-haven metal’s attractiveness,” Prathamesh Mallya, the assistant vice president of research, non-agri commodities, and currencies at Angel One, explained.
“Gold prices are expected to remain elevated as economic uncertainty, and the possibility of the U.S. Fed stopping interest rate hikes keep the demand line ticking higher,” Mallya continued.
Bullion spiked on May 4 as well. Gold reached its yearly high of $2,055.70 per ounce, while silver reached an impressive $26.50 per ounce, finally breaching the $25 line and creeping into the upper 20s.
“U.S. Dollar and bond yields dropped after the U.S. Federal Reserve opened the door to a pause in its aggressive tightening cycle, though markets were buffeted by risk aversion amid a rout in regional U.S. bank shares,” Saumil Gandhi, the senior analyst of commodities at HDFC Securities, explained.
Gandhi expects gold price levels to fluctuate in the near future, veering toward the upper range with the all-time high pushing it toward a positive bias. He believes Comex spot gold should reach around $2,033 to $2,085 per ounce, with upper support seen at $2,033 to $2,019 per ounce and first resistance at $2,070 to $2,085 per ounce. Gandhi placed support for MCX gold June futures at Rs 60,700 to Rs 60,570, with resistance at Rs 61,400 to Rs 61,750.
“Gold and silver prices are in an uptrend due to fresh bank crisis in U.S. after PacWest Bancorp accepted that it was exploring strategic options, including a sale. This has sparked an economic slowdown in the U.S. economy that further weakened the U.S. dollar, which was already under sell off stress post-U.S. Fed rate pause indication,” Anuj Gupta, the vice president of research at IIFL Securities, explained.
Following the immediate price jump on May 4, the U.S. non-farm payroll report for April came out, beating Wall Street estimates but also showing some disappointing figures. Gold and silver maintained their performance levels following this release.
“The yellow metal has a strong support at $2020 followed by $2000, while stiff resistance is seen at $2080. Dips are expected to find strong buying support,” Praveen Singh, the associate vice president of fundamental currencies and commodities at Sharekhan BNP Paribas, explained.
Most analysts seem to be in agreement on the future performance expectations for gold and silver, especially considering the relaxed strategy announced by the Fed. As always, investors should consult their financial advisors before making any portfolio decisions.