Bullion market not excited about rate cut; to stay subdued for a while

Chennai: The US Federal Reserve’s rate cut did not excite the bullion market, which has seen a sharp correction since the dollar gained strength on Donald Trump’s return as the US President. Gold and silver prices are expected to remain subdued in December.

Gold and silver prices have seen some sharp corrections in the past few days when compared to their recent highs. Gold, which was trading at Rs 79,775 per 10 gm as on Oct 30, has come down to Rs 76,300 and silver prices, which were above Rs one lakh in the third week of October, has dropped to 91,000 levels.

The dollar index has been gaining strength after the US elections results came and this has been undermining the prospects of bullion. Fears of another trade war with China hit the base metals and hence silver was affected more. The US Federal Reserve’s 25 basis points rate cut did not enthuse the market as the expectations were higher.

“The market had speculated that the US Fed will cut rates by 1.25 per cent in 2024 and 1 per cent in 2025. Previously, the Fed had made a cut of 50 basis and with 25 basis points now, it has been lower than expected. Further, Trump in his election speeches had opined that the Fed should not be aggressive with rate cuts. This has affected gold’s prospects,” said Ajay Kedia, MD, Kedia Commodities.

Further, the proposal for corporate tax cuts has given new vigour to the equity markets. Along with the surge in crypto currency prices, this too has led to profit booking in gold.

However, analysts are confident about the long-term prospects of gold and silver.

“In the first half of 2025, gold is expected to touch $3000 per ounce in the international market and Rs 85,000 in the Indian market. Silver too will see Rs 1.3 lakh levels by then. In the short to medium term, the cues that were supporting the bull-run are not strong,” said Kedia.

The Trump administration is likely to make efforts to ease the geo-political tensions and the dollar too remains strong for the time being. Further, the carryover trades and profit-booking during the end of the calendar year will keep prices under check. Gold and silver prices can either correct or consolidate during the next few weeks.

However, the weakness in rupee against the strong dollar might restrict gold and silver prices from falling much in the Indian market.