Gold prices are exhibiting significant positive momentum, having finally broken free from a protracted
consolidation phase. While silver has notably outpaced gold’s gains throughout August, a cautious
outlook suggests an increasing risk of profit-taking for the white metal, according to Vedika Narvekar, Research
Analyst – Commodities & Currencies at Anand Rathi Shares and Stock Brokers.

Last week marked a pivotal moment for gold, as it surged over 7%, registering its strongest weekly performance
since January. This robust rally has continued into the current week, pushing gold prices up approximately
8.7% this month and bringing them close to the critical $4,400 per ounce level. This impressive ascent is
underpinned by a confluence of supportive factors, including a weakening US dollar, diminishing expectations of
a September interest rate hike by the Federal Reserve, renewed enthusiasm from Exchange Traded Fund (ETF)
investors, and sustained demand from central banks and China.

What lends further credence to this rally is the growing participation of private investors alongside
institutional buyers. Global gold ETF holdings saw an additional 22 tonnes added in the week ending August
7th, signaling renewed investor confidence. Concurrently, China’s central bank extended its remarkable buying
spree to 21 consecutive months, accumulating an estimated 640,000 ounces in July alone. Further bolstering
gold’s appeal, weaker-than-expected US jobs data has driven down the probability of a September Fed rate hike
to approximately 44% from an earlier 55%. In essence, gold now benefits from both solid fundamental drivers
and fresh capital inflows, rendering the current breakout more compelling than previous attempts.

Key Focus This Week

The primary economic indicator in focus this week will be the US Consumer Price Index (CPI) report for July.
Economists are anticipating an annual inflation rate of around 3.4%. A softer CPI figure could further
propel gold prices higher, while a stronger-than-expected print might reignite expectations of a Fed rate
hike, potentially exerting downward pressure. From a technical standpoint, the $4,400 level represents a
crucial hurdle for gold’s continued upward trajectory, with $4,200 serving as a strong support. Maintaining
above this support level is essential for the integrity of the current breakout.

Gold Price Outlook

The overarching sentiment for gold remains positive. A combination of persistent central bank buying, improving
ETF flows, robust Chinese demand, a softer dollar, and reduced Fed-hike expectations are all contributing to
a bullish outlook. However, immediate risks include a hotter US inflation number or a renewed spike in oil
prices, both of which could lead to higher bond yields and a stronger dollar. Technically, gold prices are
hovering near the breakout point of $4,400, with $4,490 and $4,580 identified as the next potential upside
targets. As long as gold successfully holds above $4,200, a positive view is maintained.

Technical Levels & Near-Term Outlook

Gold (Spot) CMP: $4,400/oz

• Support: $4,290 / $4,200
• Resistance: $4,500 / $4,580

MCX Gold CMP: Rs 1,54,600

• Support: Rs 1,50,800/ Rs 1,47,600
• Resistance: Rs 1,57,600/ Rs 1,60,900

Silver’s Strong Rally, but Watch for Some Cooling

Silver has significantly outshone gold, recording an impressive 13% gain in August, compared to gold’s
approximately 9%. This superior performance is characteristic of silver’s higher-beta nature. As a result,
the gold-silver ratio has narrowed to around 67, with a near-term possibility of further moving towards 64.
However, silver’s current valuation appears increasingly stretched relative to gold. Existing correlations
suggest that silver is trading at a premium of roughly $9 per ounce compared to levels implied by gold’s
price. While the broader trend for silver remains positive, its sharp outperformance implies that near-term
upside potential could become more limited, and the risk of profit-taking is on the rise.

International Silver CMP: $65.30/oz

• Support: $62.50 / $61
• Resistance: $67.50/ $70.50

MCX Silver CMP: Rs 2,37,400 (Sept contract)

• Support: Rs 2,27,200/ Rs 2,21,700
• Resistance: Rs 2,45,400 / Rs 2,56,300

(Disclaimer: Recommendations and views on the stock market, or any other asset classes
or personal finance management tips given by experts and analysts are their own. These opinions do not
represent the views of The Times of India.)