In recent trading sessions, gold prices have experienced fluctuations amidst rising US yields. As of December 8, spot gold traded within a narrow range of $4176 to $4219, settling at $4192, marking a slight decline of 0.1% for the day. Concurrently, the MCX February gold contract reported a decrease of 0.36%, priced at Rs 129,770. Notably, the previous week concluded with a weekly loss of nearly 0.95% for the yellow metal at $4198.
Analysts highlight that a supportive environment for gold is anticipated, particularly driven by positive global cues. Praveen Singh, Senior Fundamental Research Analyst at Mirae Asset Sharekhan, advocates for a “buy on dips” strategy for investors, suggesting a potential upward trajectory for gold prices in the near future. He cites various factors, including federal monetary policies and geopolitical tensions, that could further influence the market.
The US Dollar Index saw an uptick, hovering around 99.20, bolstered by rising yields. Ten-year US Treasury yields climbed to 4.17%, while two-year yields reached 3.59%, reflecting concerns over inflation as the Federal Reserve navigates potential rate cuts. Speculation around a 90% probability of a 25 basis point rate cut by the Fed on December 10 underscores market sentiments.
The dynamics of gold ETF holdings have also been notable, with a total of 97.84 million ounces as of December 5, the highest level since late October. Year-to-date, ETF holdings have risen by 18%, symbolizing a significant influx of 466 tons. Conversely, eligible COMEX gold inventory has fallen to 18.277 million ounces, down 18.58% from earlier highs.
China’s Central Bank has maintained its gold purchasing momentum, acquiring an additional 30,000 ounces, marking the 13th consecutive month of increased reserves. This strategic move coincides with a remarkable rise in China’s foreign exchange reserves, now nearing $3.35 trillion, the highest since 2016.
The Bank for International Settlements recently noted a shift in gold’s perception, asserting that retail investors have increasingly treated gold as a speculative asset rather than solely a safe haven. This evolving narrative reflects a broader trend where both equities and gold have simultaneously shown upward movements, a rarity in historical contexts.
On the economic front, Japan reported a contraction in its 3Q GDP, and China’s trade surplus expanded, indicating a broader trend towards bolstering domestic demand. The upcoming week is set to feature significant U.S. economic data releases, including job openings, the employment cost index, and trade balance metrics.
With expectations of continued market volatility driven by geopolitical factors, inflation concerns, and evaluations of the job market, gold remains well-positioned for potential gains. Analysts suggest key support levels at $4160, $4115, $4085, and $4050, with resistance projected at $4245, $4300, and the all-time high of $4381.
In light of the overall market sentiment and ongoing trends, silver has also garnered attention. The metal has seen net inflows of 132.50 million ounces year-to-date, bolstered by increased ETF holdings and a decline in Chinese inventories. With a strategic focus on buying during downtrends, targets for silver could reach as high as $62 in the coming months, contingent on broader economic movements.
Investors are advised to monitor the evolving situation closely, particularly with the anticipated Fed policy changes and shifts in market sentiment regarding both gold and silver assets.
