Gold, Silver Prices This Week: MCX Gold To Fluctuate From Rs 61,500-63,400, Silver Seen In Narrow Spread

Both gold and silver prices after second-weekly gains are expected to witness some pullbacks in the trading week from December 25th to 29th. In the bullion market, MCX gold prices may fluctuate between Rs 61,500 to Rs 63,500 per 10 grams, while silver is seen in a narrow spread ranging from Rs 74,000 to Rs 77,000 per 1 kg levels. The reason behind the previous two weeks' upside in precious metals is the Fed rate cut hopes in 2024 which will make the dollar weak and safe haven assets attractive.

Currently, 22-carat gold in 10 grams is at Rs 58,200, while 24-carat and 18-carat are priced at Rs 63,490 and Rs 47,620 respectively.

Meanwhile, MCX gold prices with February expiry stood at Rs 62,972 per 10 grams last week on Friday, up marginally. Also, silver prices with March expiry edged higher to Rs 75,448 per 1 kg. These prices inched up due to a rise in international prices as dollar and treasury yields dropped on heightened expectations that the Fed may cut key rates sooner-than-expected in 2024.

The market is broadly pricing about 100-150 bps rate cuts from the Fed. A similar case is expected from RBI in the range of 25-100 bps rate cuts in 2024, which was another driving factor for precious metals.

Spot gold in London at the latest had rallied to $2,070.61 an ounce, while US gold futures with February expiry also shot up to $2,083 an ounce levels.

What to expect in precious metals from December 25th to 29th?

According to SMC Global Securities, the CRB index recorded a slight uptick, propelled by a continued decline in the dollar, coupled with some positive developments in economic data. The Dollar Index experienced a significant decline, dropping from a peak of 107 in October 2023 to 101.5. This decline was triggered by signals of potential rate cuts in 2024, providing commodities with an advantageous position in the market.

In the bullion market, this week, the brokerage's note said, ", gold and silver are anticipated to engage in range trading, with gold fluctuating between 61,500 and 63,500 and silver between 74,000 and 77,000 in a relatively narrow spread."

SMC's note highlighted that gold experienced a second consecutive week of gains, propelled by a significant drop in the dollar and Treasury yields. Traders increasingly bet on the likelihood of the US Federal Reserve initiating interest rate cuts in the coming year. Thursday's data revealed that US economic growth in the third quarter was not as robust as initially thought, and the December Philadelphia Fed Manufacturing Index fell well below expectations.

It added the dollar index lingered near a five-month low, heightening gold's appeal to holders of other currencies. Simultaneously, US 10-year bond yields hovered close to their lowest point since July. The upcoming focus for investors is Friday's US core PCE reading, the Federal Reserve's preferred inflation gauge, which will provide insights into the monetary policy outlook.

Furthermore, the brokerage's note revealed that market participants are now pricing in an 83% probability of a US rate cut by March, according to the CME FedWatch tool. Lower interest rates have reduced the opportunity cost of holding non-yielding bullion. Meanwhile, UK inflation plummeted in November to a more than two-year low, reinforcing the possibility of a global cycle of rate cuts. In other regions, the Bank of Japan maintained its ultra-loose monetary policy, and the People's Bank of China kept benchmark lending rates unchanged.

These factors will play a key role in influencing the prices of precious metals this week.

Lastly, SMC's note said, "On the Comex, gold prices rebounded after testing significant support at $1980 and are now advancing towards $2080; a break above this level could push prices to new highs. Silver prices are mirroring gold's trajectory and may trade in the range of $23.600 to $25.90. Looking ahead in the week, Gold prices on MCX are expected to fluctuate between Rs 61500 and Rs 63400, while silver may trade in the range of Rs 73200 to Rs 77400 levels."

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