Gold and silver surge on US Fed rate cut buzz. Which metal to buy?

Gold and silver prices saw significant buying momentum this week, driven by speculation of a potential rate cut by the US Federal Reserve and a weakening US dollar. The Multi Commodity Exchange (MCX) gold rate ended the week at ₹71,395 per 10 gm, marking a weekly gain of 2.12%, while spot gold closed at $2,507 per ounce, up 3.13%.

Silver outpaced gold with a stronger performance, finishing at ₹83,213 per kg on the MCX, a weekly rise of 3.31%. In the international market, silver ended at $29 per ounce, recording a 5.67% gain.

Experts attributed the uptrend in bullion to the robust US job data released on Thursday, which reduced recession fears and increased expectations of a rate cut by the US Fed. The weaker dollar, which hit a six-month low, further bolstered gold and silver prices. Geopolitical tensions in the Middle East also added to the safe-haven demand for these metals.

Sugandha Sachdeva, Founder of SS WealthStreet, pointed out that softer-than-expected US inflation data has strengthened the case for a rate cut by the Fed in its upcoming September meeting. This, coupled with growing demand for gold ETFs and heightened geopolitical tensions, has pushed gold prices to a record high.

"Adding to the upward momentum were escalating geopolitical tensions in the Middle East, which have heightened safe-haven demand for gold. Additionally, demand for gold ETFs remained robust in North America and Europe throughout July," said Sugandha.

Outlook for gold and silver

Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said the MCX gold rate could target ₹72,000 and ₹72,800 in the near term, with spot gold prices potentially reaching $2,530 to $2,560 per ounce. For silver, Gupta suggested near-term targets of ₹85,000 to ₹87,000 per kg on the MCX.

"The immediate target for the MCX gold rate today is ₹72,000 and ₹72,800, while in the international market, spot gold prices may touch 2,530 and $2,560 per ounce in the near term," said Anuj Gupta.

On the outlook for silver prices, Anuj Gupta of HDFC Securities said, “The MCX silver rate today has immediate support at 81,000, whereas its crucial support is placed at ₹80,000 per kg. Spot silver has supports at $28 and $27 per ounce. The near-term targets of the MCX silver rate today are seen at 85,000 and ₹87,000 per kg.”

Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, highlighted that silver’s recent outperformance is due to its higher risk-reward ratio, particularly when the gold-silver ratio is around 90. He advised investors with a near-term outlook to consider silver for better returns.

Gold vs silver: Which is better?

On why silver outshined gold price rally last week, Amit Goel said, "During correction in July and August this year, silver prices had slipped more than the yellow metal. This led to the gold-silver ratio in the international market at 90. Over the last year, it has been found that silver prices ascend more than gold if the gold-silver ratio is around 90, whereas gold outshines silver when the ratio is below 80." At the end of last week, the gold-silver ratio was around 86.50 (2507/29)."

The Pace 360 expert said that silver's risk-reward ratio is higher than gold's, and hence, if one has a near-term perspective, one should invest in silver.

Gold prices up in Kerala

Along with the global trends, the gold prices in Kerala shot up in a single day. One gram of golded traded up by Rs 105 to Rs 6,670 and an 8-gram sovereign rose by Rs 840 to Rs 53,360. The highest price in Kerala so far for an 8-gram sovereign was Rs 55,120 recorded on May 20.

The price of 18-carat gold, which is used to make light weight jewellery, also rose by Rs 90 to Rs 5,515 per gram today.

Disclaimer: The views and recommendations above are those of individual analysts and not necessarily those of this publication. Investors are advised to consult certified experts before making any investment decisions.

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