gold prices: Fed rate cuts, their impact on gold prices, and key levels to monitor this week

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What happened to gold and silver last week? What’s the outlook for these commodities this week? And how might the Fed’s actions impact gold in the near future? ET Markets discussed these questions with Naveen Mathur, Director of Commodities & Currencies at Anand Rathi Shares and Stock Brokers, in this week’s ET Commodity Talk. Excerpts:

Gold and silver plunged on Friday amid a rebound in the dollar index and the U.S. bond yields. Can you sum up last week’s commodities?
Naveen Mathur: Data released Friday showed the Fed’s favored inflation measure, the core PCE deflator, came in at 0.2% month-on-month, the year-on-year remained at 2.6% rather than rise to 2.7% as the consensus predicted. A 0.2% MoM reading keeps inflation on the correct run-rate to get annual inflation to 2% by early next year which is the US Feds target This along with robust consumer spending numbers & declining real disposable income indicated a decline in the personal savings rate. Overall it makes the case for only a 25 bps rate cut in September as it made gold pared all its gains last week.

The dollar index showed very high volatility and recovered from lows last week amid mixed U.S. economic data. What’s the trend now?
Naveen Mathur: The Dollar Index seems to consolidate in the week at lower levels amid the US Payrolls report due on Friday could be the next important trigger for the same after recent weakness and downward revisions to payrolls last month kept the market nervous of the next payroll numbers for August month.

What are the levels for gold and silver? What will the overall trend be this week?
Naveen Mathur: Sure, below are the levels for gold and silver.

2Sept_CommoditiesETMarkets.com

What is there for investors vs traders?
Naveen Mathur: Traders may brace for further weakness in prices of Gold & Silver prices in the next 2 – 3 weeks perspective which could be a good buying opportunity for Investors looking to accumulate gold at lower levels for a potential bullish bias to be witnessed for next year.

Watch the full interview here. How will the Fed rate cut impact gold prices in the near term?
Naveen Mathur: A 25 bps rate cut in September would only lead to a neutral to bearish view for prices for the near term. However, guidance by the US Fed chair on further rate cuts for the year along with projections for 2025 could be closely scrutinized that could create volatility in prices at lower levels.Disclaimer: Recommendations, suggestions, views and opinions given by the experts/brokerages do not represent the views of Economic Times.

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