A relatively cautious session across the precious metal space. Gold prices edged lower after a more than 2% gain in the previous session, as the US dollar firmed ahead of a key inflation report due later this week that could provide more cues on the US interest rate trajectory. Silver, too, hovered around the $77 per troy ounce mark.
Key focus on Fed Minutes
The big cue for precious metal space was the minutes of the last US Fed meeting. The Fed minutes showed policymakers are divided over possible rate direction in the US. According to the minutes of the last Fed meeting, the next chairman, due to start in May, will have a hard time pushing through rate cuts.
Several policymakers are expecting productivity gains to dampen inflation, the minutes highlighted. However, it also indicated that “most participants” cautioned that progress may be slow and uneven. Several even indicated hikes are possible if inflation stays above target.
Gold slips amid low volumes
Trading volumes in the precious metal space remained relatively low. This is because the mainland Chinese, Hong Kong, Singapore, Taiwan and South Korea markets are closed for the Lunar New Year holidays. This is also expected to result in some volatility in the gold price movement.
Offering an outlook for gold, Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, highlighted that “A decisive break above $5,000 on CME would be required to negate the short-term weakness and revive bullish momentum.”
He believes that “China’s market reopening may inject additional volatility in the coming sessions.”
Silver continues to be under pressure
The spot silver prices are hovering below the psychologically important $80 per troy ounce levels. Investors now await the weekly jobless claims report due later in the day and the Personal Consumption Expenditure (PCE) data, the Fed’s preferred inflation gauge, due on Friday, for more cues on monetary policy.
Kaynat Chainwala, AVP Commodity Research, Kotak Securities, highlighted that silver “slipped to one-week lows weighed down by stronger dollar and improved geopolitical sentiment after Iran signalled a ‘general agreement’ with the US on a potential nuclear deal.” Looking ahead, Asian volumes remain muted across major markets due to ongoing Lunar New Year holidays (till Feb. 23), limiting liquidity and risking short-term swings in precious metals.”
