Gold targets new high as US data trigger haven demand

Gold headed to a new high and silver topped $25 an ounce as the dollar index fell to a 2-month low and US data triggered a haven demand for precious metals.

In early Wednesday trade, gold futures for delivery in June surged to $2,047.75 an ounce on COMEX and silver futures for delivery in May ruled at $25.02 an ounce.

Gold zoomed to a record high of $2,074.88 on March 7, 2022. Silver saw such highs a year ago. Since the beginning of the year, gold has gained over 10 per cent and silver 4.3 per cent.

On Multi-Commodity Exchange, gold June contract traded at a record high of ₹61,105 per 10 gm. Silver May contract ruled at ₹74,753 a kg. Spot gold (22-carat) price in Mumbai was fixed at ₹59,320/10 gm on Wednesday evening.

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Trigger for surge

Colin Shah, Managing Director of Kama Jewellery, said primary reasons for the rally in precious metals were the softening dollar index. “The index has fallen as there is a widening belief that the Fed may not only pause but start slashing rates by the end of this year. Precious metals, being haven, often attract investors’ interest in times of uncertainty and slowdown, low rates,” he said.

The trigger for the current surge was a fall in factory orders and drop in job openings, which are seen as clear signs of an impending slowdown in the US economy. “These developments will restrict the Fed’s ability to tighten rates and liquidity,” Shah said.

Hareesh V, Head of Commodities at Geojit Financial Services, said ongoing uncertainties in the global economy will continue to support gold. “A weak US currency, unstable global equities, and robust physical demand from top consuming countries like China and India will assist the metal to edge higher in the near future,” he said.

‘Cup and handle pattern’

In the domestic market, there are chances of a technical correction as prices are at all-time highs, though the bullish trend will likely continue, he said.

Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies at Angel One Ltd, said gold was expected to rise towards ₹61,460 and a break above that will take it to ₹61,890 levels.

Shah said, “We are witnessing a cup and handle pattern in prices. We expect the rates of gold to appreciate further primarily due to domestic demand in view of festivities and central banks buying.”

Research agencies such as Fitch Solutions Country Risk and Industry Research, a Fitch Group unit, say the banking turmoil has also triggered a rush to safety among investors fearing recession.

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