By Bhavik Patel
The market was watching for the US PCE (Personal consumption expenditure) index for July 2023 which contains the most current data on inflation and the preferred measuring benchmark by the Federal Reserve. The data shows that inflation although has subsided but continues to remain persistent. The US savings rate fell by 3.5% which could mean that increased consumer spending is not sustainable. The sticky inflation means the Federal Reserve is likely to maintain its aggressive and restrictive monetary policy. According to CME’s Fedwatch tool, there is 89% chance of no rate hike in September and 57.1% probability of rate hike in November. Today’s US Non-farm payroll data will be very important as inflation is sticky and persistent but if labour market remains strong then expect at least one more rate hike before the Fed starts cutting rate next year.
Even though recently silver has outperformed gold due to the short covering of silver positions, China’s growing economic turmoil could weaken silver jewelry demand and soft electronic sales will dampen industrial demand for the precious metal. The global electronics PMI suggests that there has been a renewed downturn in the industry which will impact silver demand. We predict that the Fed will start lowering interest rates before the majority of other major central banks in early 2024. Falling Treasury yields over this time period should increase investment demand for silver since they reduce the opportunity cost of doing so. So expect silver to outperform next year.
In MCX, gold has strong support around levels of 58,000. The momentum oscillator has started turning positive as RSI_14 is at 55 with no clear divergence on daily scale. Prices are comfortably trading above 20 and 50-day moving average. Since today there is Non-farm payroll in the evening so we would advise traders to wait for the data and go long around any correction near 58,800 – 58,500 with an expected target of 59,600 and stoploss of 58,100 closing basis.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)