Context:
Gold and silver prices witnessed strong gains in November due to expectations of US interest rate cuts and soft labour market data, boosting demand for precious metals globally and in India.
Key Highlights
Global Market Trends
- Comex Gold surged above the psychological $4,200 level, closing at $4,256.4 (+6.05%).
- Comex Silver hit a 52-week high and a lifetime high of $57.08, gaining 18.31% in November.
- Drivers:
- Weak US labour data.
- Expectations of Fed rate cuts → lower yields → higher demand for gold/silver.
Domestic Market Movement (MCX)
- MCX Gold:
- Gained 5.7%, settling at ₹1,29,599/10 gm.
- Short-term bullish trend; possible rise to ₹1,38,000–₹1,40,000.
- MCX Silver:
- Gained 15.8%, settling at ₹1,75,340/kg.
- Expected to rise to ₹1,82,000–₹1,83,000.
Technical Outlook
- Gold consolidation phase may be ending; next target $4,450–$4,500 unless it falls below $3,900.
- Silver outperforming gold for several months; target $60–$62 unless it drops below $48–$49.
Investor Sentiment
- Safe-haven demand rising due to:
- Lower interest rates
- Bond yield fall
- Geopolitical uncertainties
- Metals expected to stay bullish in the near term.
Relevant Prelims Points
Why Do Lower US Interest Rates Boost Gold Prices?
- Lower rates → reduced opportunity cost of holding gold.
- Weaker dollar → gold becomes cheaper for foreign investors.
- Investors shift to safe-haven assets.
Key Terms
- Comex: Global commodities exchange for metals.
- MCX: Multi Commodity Exchange of India.
- Spot price vs. Futures price.
- Safe-haven asset — gold protects against volatility.
Factors Influencing Gold/Silver Prices
- Inflation expectations.
- Central bank policies.
- US treasury yields.
- Geopolitical instability.
- Currency fluctuations.
Relevant Mains Points
Economic Linkages
- Gold prices act as an inflation hedge.
- Rate cuts can cause:
- Capital flow to emerging markets
- Currency weakness
- Demand shifts in commodity markets
Impact on India
- India is a major importer of gold → rising prices widen CAD.
- Domestic jewelry demand may cool due to higher prices.
- Silver demand boosted from industrial use (EVs, solar).
Market Risks
- Possible reversal if Fed delays rate cuts.
- Volatility from global macroeconomic shifts.
Way Forward
- Investors must assess risk levels.
- Diversify into gold only within acceptable allocation limits (5–15%).
- Monitor US Fed communications closely.