NEW DELHI: Gold and silver could extend their recent gains next week, with investors likely to track inflation data from major economies, expectations on the US Federal Reserve’s monetary policy and developments in West Asia, analysts said.
Bullion prices posted a strong weekly rally after weaker-than-expected US labour market data revived expectations that the Federal Reserve could adopt a more accommodative monetary policy stance. A softer US dollar also supported demand for precious metals.
Gold futures for October delivery rose Rs8,444, or nearly 6 per cent, during the week to close at Rs1.51 lakh per 10 grams.
Pranav Mer, Senior Vice-President, EBG – Commodity & Currency Research at JM Financial Services, expects the positive momentum to continue, with gold potentially moving towards Rs1.57 lakh per 10 grams and silver towards Rs2.80 lakh per kg in the short term.
Global bullion
The rally was even stronger in international markets. Gold futures for December delivery gained $292.70, or about 7 per cent, during the week to close at $4,399.70 an ounce.
Silver futures for September delivery surged $5.71, or nearly 10 per cent, to $63.50 an ounce.
Jateen Trivedi, VP Research Analyst, Commodity and Currency at LKP Securities, said the rally was driven largely by the weaker US labour market data, which strengthened expectations of easier monetary policy.
Markets will next turn to inflation data from the US, Germany, Japan and India. The data could influence expectations about the path of interest rates and, in turn, the direction of the dollar and bullion prices.
Chinese economic data will also be closely watched, particularly for silver, given its significant industrial demand.
A further weakening of the dollar could provide additional support to gold and silver, while any reassessment of expectations on US interest rates could trigger profit-taking after the sharp weekly gains.
West Asia risk
Geopolitical developments in West Asia will remain another important driver of bullion prices. Developments involving the US and Iran could influence investor demand for safe-haven assets.
Any escalation in tensions could push gold higher, while a diplomatic breakthrough could reduce some of the geopolitical risk premium built into prices.
With gold and silver having posted substantial weekly gains, analysts expect volatility to remain elevated. The combination of inflation data, Fed expectations, movements in the dollar and geopolitical developments will determine whether the rally can be sustained.
