Gold and Silver Strengthen Amid Festive Season [18-Oct-2022]

Gold and silver prices inched higher but were pinned below key support levels as markets feared more interest rate hikes by the Federal Reserve. A steep fall was witnessed in both gold and silver prices as data showed U.S. inflation will likely take much longer to cool than initially expected.

Fed Policy Meeting in Nov

The U.S. CPI data drove up expectations of more inflation-busting rate hikes in the Fed policy meeting in Nov. There is a 98%  probability of a 75bps rate hike in Nov meeting, which is a fourth consecutive aggressive hike in this year. The hike will put U.S. interest rates at around 4%, their highest level since late-2007. The pressure on metals was also witnessed amidst a stronger dollar, which stayed within sight of a 20-year peak; while U.S. Treasury yields also traded at their highest levels since the 2008 financial crisis.

Geo Political Tensions

There are several updates regarding the geo-political tensions, China has also ordered evacuation of all citizens from Ukraine amidst the escalation in the matter, which is supporting bullions. The economic calendar is fairly muted this week with not many important data points from the U.S. although focus will be on the  comments from Fed officials. Broader trend on COMEX could be in the range of $1622-$1680 and on domestic front prices could hover in the range of Rs 50,150-51,150.

Inflation

COMEX Gold trades 0.40% higher near $1656/oz amid slightly weaker US Dollar index and US treasury yields. The metal witnessed its worst weekly close since August amid steady US Dollar and rising treasury yields. Gold witnessed wild moves last week after the US CPI print that came in more than expected supporting the Fed’s case for aggressive rate hikes. The bulls have failed to keep the price above the $1700/oz as disappointing data pointers from the US is indicative of the fact that the Fed will be committed with their aggressive stance of cooling down the inflation. However , Worsening global growth outlook might boost the safe haven buying at lower levels.

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