Gold & Silver Skyrocket to 3-Week Highs: Is the Fed's Next Move the Secret?

Gold and silver prices have reached their highest point in approximately three weeks, a rally attributed to diminishing worries about a potential US government shutdown and increasing anticipation of another interest rate cut by the US Federal Reserve in December.

Gold futures were trading close to Rs 1.25 lakh for 10 grams, and silver prices surpassed Rs 1.55 lakh per kilogram, indicating strong momentum in the global and domestic bullion markets. The US Senate's progress towards a temporary funding deal to end the government shutdown has boosted investor confidence, simultaneously fueling speculation that the Federal Reserve might implement another rate cut to support the economy.

Lower interest rates generally make assets that do not pay interest, such as gold and silver, more appealing to investors seeking safer alternatives during times of economic uncertainty. Additionally, a weaker US dollar and ongoing geopolitical tensions have further amplified the demand for precious metals as safe-haven assets.

Rahul Kalantri, Vice President of Commodities at Mehta Equities, noted that gold has already met its short-term international target of $4,150 (around Rs 1,25,000), and silver has hit its near-term target of $50.80 (around Rs 1,55,000). Both metals may consolidate before attempting further upward movement. Kalantri provided specific support and resistance levels for both gold and silver, indicating that a continued trend above support levels would suggest an uptrend, while falling below them might signal a short-term correction.

Looking longer-term, global investment bank JP Morgan has projected that gold could exceed $5,000 an ounce next year, driven by consistent central bank purchasing and concerns about inflation and slowing global growth.

Impact For Indian investors, this rally suggests that any dip in prices could present a favourable opportunity to accumulate gold gradually for long-term wealth preservation. However, those seeking short-term profits should exercise caution as both metals are nearing their short-term resistance levels and might pause their ascent. The upward trend in precious metals can influence inflation outlooks and asset allocation strategies for Indian investors. Rating: 8/10

Difficult Terms: * Bullion: Gold or silver in bars or ingots, especially when held as investment. * Federal Reserve: The central bank of the United States, responsible for monetary policy. * Interest Rate Cut: A reduction in the central bank's benchmark interest rate, making borrowing cheaper and potentially stimulating economic activity. * Non-yielding Assets: Investments that do not provide regular income, like interest or dividends, and are expected to gain value through price appreciation (e.g., gold, silver). * Safe-haven Assets: Investments that are expected to retain or increase their value during periods of market volatility or economic downturn. * Support Levels: A price range where a declining asset price is expected to stop falling due to increased buying interest. * Resistance Levels: A price range where an increasing asset price is expected to stop rising due to increased selling interest. * Consolidate: A phase where an asset's price trades within a narrow range, indicating a temporary pause before a potential breakout or trend continuation.