Gold and Silver Prices Recover Modestly on Short Covering and Fed Rate Cut Hopes

Gold and silver prices experienced a modest recovery on Wednesday, finding support from short covering activities and a dip in US Treasury yields. The anticipation of a 25 basis point interest rate cut by the US Federal Reserve further bolstered market sentiment. On India's Multi Commodity Exchange (MCX), gold December futures saw a slight uptick, trading above Rs 1,19,755 per 10 grams, while silver December futures also showed a small gain, quoted around Rs 1,44,768 per kg. This rebound followed a session where both metals touched three-week lows before buyers stepped in. The softening dollar index also contributed positively. Rahul Kalantri of Mehta Equities highlighted that short covering and corrective buying at lower price levels, combined with US Federal Reserve rate cut expectations, drove the recovery.

**Impact** This news is positive for commodity markets as it signals a potential stabilization or upward trend in gold and silver prices. For Indian investors, especially those involved in commodity trading or holding gold/silver assets, this recovery is a welcome development. However, ongoing US-China trade discussions have introduced some caution, limiting extreme upside potential.

**Definitions** * **Short covering**: This is a trading strategy where investors buy back assets they previously sold short to close their positions, which can drive prices up. * **US Treasury yields**: These are the interest rates on debt issued by the U.S. government, often considered a benchmark for global borrowing costs. Lower yields generally make gold more attractive. * **Federal Reserve**: The central bank of the United States, responsible for monetary policy. * **Basis points**: A unit of measure for interest rates, where 100 basis points equal 1 percentage point. A 25 basis point cut means a 0.25% reduction in interest rates. * **MCX**: Multi Commodity Exchange of India, a commodity derivatives exchange. * **COMEX**: Commodity Exchange Inc., a major US-based futures exchange. * **Spot gold**: Gold available for immediate delivery at the current market price. * **US gold futures**: Contracts to buy or sell gold at a predetermined price on a future date. * **Central bank buying**: When national banks purchase gold, it adds to demand and can support prices. * **Geopolitical risks**: Potential threats to global stability arising from international relations, which can drive demand for safe-haven assets like gold.

**Impact Rating**: 7/10