Gold price gains for second consecutive week, silver surges to 11-year peak
At 1304 GMT, spot gold surged by 0.9% to $2,396.81 per ounce. Bullion prices have climbed by 1.5% this week, following a one-month high on Thursday. In the meantime, gold futures for June delivery in the U.S. concluded 0.4% lower, settling at 2385.50 per ounce.
Gold prices were poised for a second consecutive weekly increase on Friday, driven by heightened expectations of interest rate cuts. This bolstered silver prices, pushing them past the $30 mark to reach an 11-year peak.
At 1304 GMT, spot gold surged by 0.9% to $2,396.81 per ounce. Bullion prices have climbed by 1.5% this week, following a one-month high on Thursday. In the meantime, gold futures for June delivery in the U.S. concluded 0.4% lower, settling at 2385.50 per ounce.
"Gold prices inched higher, hovering near $2400 while silver marked an all-time high on the domestic front, amidst soft inflation data pulled the dollar to one-month lows and pushed up expectations of interest rate cuts. Since the start of this month, there have been weak economic data points like the US jobs market, inflation, retail sales and a few housing numbers. US CPI and Core CPI were reported to be lower than the previous month's CPI by 0.1% and 0.2%, respectively. In the previous session, weekly jobless claims were reported to be better than expected. Similarly, housing starts and building permits showed signs of weakness, supporting billions," said Navneet Damani, Senior VP – ofCommodity Research at Motilal Oswal Financial Services.
Damani added, “The CME Fed-watch tool showed traders pricing in a greater chance of a 25 bps cut in September, at nearly 54%. Still, several Fed officials warned over the past week that the central bank needed more confidence that inflation was going down. A sharp rally in industrial metals has also supported an up-move in silver prices. Today, the economic calendar is fairly light w.r.t. the US; however, the focus will be on EU CPI and comments from Fed officials.”
What's weighing on gold prices?
In terms of demand, anticipations of sustained robust demand in China were boosted following the nation's announcement of further measures to stabilise its property sector, which has been facing a crisis.
China's demand, a significant contributor to the recent surge in gold prices, is gaining increasing importance. Observers closely monitor whether the elevated gold prices will lead some central banks to reduce their purchases and how outflows from physically backed gold exchange-traded funds will evolve.
During 2022-2023, global central banks actively purchased gold. However, China's central bank, the largest buyer, scaled back its buying activity in April as spot gold prices surged to a record high of $2,431.29.
In the physical market, dealers in China offered reduced premiums, while deeper discounts were observed in India throughout the week.
On the supply side, the 15% rise in gold prices since the beginning of 2024 has helped maintain robust margins for gold miners. According to data from the World Gold Council, the global average total expenses for gold miners stood at $1,342 per ounce in the final quarter of 2023.
Gold prices in India
Back home, Gold prices dropped by ₹11 to ₹72,969 per 10 grams on Friday, attributed to speculators trimming their positions. Gold contracts for June delivery on the MCX also experienced a decline of ₹11, trading at ₹72,969 per 10 grams, with a business turnover of 10,865 lots.
“With gold prices securely above the ₹72000 mark, anticipation mounts for a touch of ₹73500-74000; however, prudent short-term traders are advised to lock in profits. Consider fresh buying only beyond the ₹74650 threshold,” said Rahul Kalantri, VP of commodities at Mehta Equities Ltd.
Silver and other metal prices
Silver prices surged by 2.7% to $30.39 per ounce following a breakthrough above a significant resistance point of $30. While silver reached the $30 price mark in early 2021, maintaining this level consistently has proved elusive for over a decade.
“This surge has been driven by strong investment and industrial demand. While ETFs have shown little interest in silver, physical sales have increased as the metal is perceived to be undervalued. The gold-to-silver ratio, which reached its widest spread in September 2022, has since narrowed to around 80 and is expected to drop further to 70 if the Fed cuts rates and the US economy remains resilient. The silver market is also benefiting from its use in solar panels, which is projected to reach a record high this year, leading to a fourth consecutive deficit in the silver market,” Kalantri added.
Platinum increased by 0.8% to reach $1,065.60, following a one-year high reached on Thursday. The metal has risen 7% this week, driven by ongoing structural deficits.
Meanwhile, Palladium declined by 0.4% to $990.00, influenced by the growing market presence of electric vehicles.
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