👉 Mixed comments by FOMC officials hurts market sentiment
COMEX Gold prices held declines as dollar traded at higher levels near 105.5 following hawkish comment by a Fed official. Fed Reserve Bank of Minneapolis President Neel Kashkari said the central bank would likely keep rates where they were “for an extended period” and declined to rule out future hikes. Besides, China’s central bank topped up its gold reserves for an 18th straight month in April, albeit at a slower pace.
Exclusive Comex Gold Analysis by Kaynat Chainwala, Senior Manager-Commodity Research, Kotak Securities
Fewer rate cuts and easing geo-political risks – a headwind for gold prices
COMEX Gold prices saw a rollercoaster ride in April, as the yellow metal skyrocketed to an all-time high of $2448.8 per troy ounce (Rs.73,958 per 10 gram in MCX) during the first half of the month, aided by an escalation in geo-political tensions, robust Chinese demand for the metal and sharp rise in speculative buying. COMEX Silver prices also witnessed a similar move, rising to a 3 year high of $29.90 per troy ounce (MCX prices touched a fresh record high of Rs.86,126 per kg), tracking broad gains in bullion and industrial metals.
After covertly fighting for decades, Iran and Israel saw a direct conflict in April as the latter’s missile strike on Iran’s consulate in Damascus killed Senior Iranian military leaders. Iran retaliated by launching hundreds of missiles and drones at Israel from its own territory, the first direct conflict between the two military powers in decades. This led to speculation that it would lead to a full blown war in the middle-east, home to a third of global oil supplies, boosting the safe haven demand. Meanwhile, The PBoC continued last year’s gold buying spree into Q1, reporting an addition of 27t to its gold reserves and turned a net buyer for the 17th consecutive month in March. Chinese ETFs have also seen good investor demand amid a rout in the nations property sector and stock market.
The trend seen during the first half of the month reversed after the geo-political tensions eased, with the focus shifting to US inflation and Fed policy. Israel responded to Iran’ missile attack in a contained, symbolic manner, which was downplayed by Iran and bringing an end to the dramatic escalation for now. Meanwhile, US CPI data showed inflation rose 0.4% m/m in March, for the third consecutive month, indicating that the hotter readings at the start of the year were not an aberration and inflationary pressures are staying firm. Several Fed officials last month echoed the same in their comments and said that they are not in a hurry to cut interest rates, pointing to elevated inflation and resilient Jobs market. Swaps are now discounting just one rate cut this year, which is far below the roughly six seen at the start of 2024, and the three that Fed officials penciled in the March Summary of Economic Projections.
During the May FOMC meeting Fed kept the rates steady for the sixth consecutive time, reduced the pace of QT and said that next move being a rate hike in unlikely. Geo-political situation improved as the US and Saudi Arabia are also nearing a historic pact that would offer the kingdom security guarantees and lay out a possible pathway to diplomatic ties with Israel, bringing more stability to the region. Investors now await April inflation and Jobs numbers for gauging the Fed’s policy trajectory and timeline for rate cuts.
totally irrelevant projection for 12th january