Gold and silver prices reached record highs last week, jumping 3% and 6%, respectively, as the FED cut interest rates last week and the BOE is expected to cut this week. ECB is expected to take a pause, while BOJ is expected to raise interest rates. Gold discounts expanded in India this week as demand plummeted despite the wedding season, after prices reached record highs, while Chinese demand remained quiet due to volatility and high spot prices.

The increase in Silver to the Rs 2lakh level has been fueled by tightening stocks, strong industrial demand, and the metal’s inclusion on the US key minerals list. Demand has been especially robust in the solar, electric vehicle, and data centre sectors. Strong ETF inflows and retail buying bolstered forecasts of a market deficit next year. At the same time, rising leasing rates and higher borrowing prices for physical silver in London hinted at persistent delivery issues.

After three straight interest rate cuts, the Federal Reserve indicated that one more rate cut is expected in 2026. The market, on the other hand, sees the risks skewed in favour of the Fed doing more, with many analysts, including us, forecasting more 25 basis point cuts in March and June. The Federal Reserve’s monetary policy stance will remain a central subject as markets anticipate fresh indications of its future steps.

The market is mostly focused on the jobs report due on Tuesday and the inflation data scheduled for Thursday. On Wednesday of this week, the Bureau of Labour Statistics will issue the delayed October and November job data. The market consensus predicts a disappointing print, with poor payroll growth. Fed Chair Powell has stated that payroll data may be overestimating job creation by as much as 60,000 per month. If this is confirmed, it could further indicate that the US economy is losing jobs.

The market is mostly focused on Tuesday’s jobs report and Thursday’s inflation data. On Wednesday, the Bureau of Labour Statistics will reveal the delayed October and November job numbers. The market expects a lacklustre print, with poor payroll growth. Fed Chairman Powell has stated that payroll data may be overstating employment creation by up to 60,000 per month. If this is accurate, it could indicate that the US economy is losing jobs.
The Bank of England is expected to cut interest rates this week on Thursday, though the decision will likely be close. The committee remains divided, and while Governor Andrew Bailey has signalled a more dovish view, his choice will most likely determine the outcome of the vote. Given the recent lessening of inflationary pressures, a rate cut remains on the table, but not guaranteed.

The Bank of Japan is apparently preparing to raise its benchmark interest rates for the first time in eleven months. If the raise is implemented, the country’s policy rate will hit its highest level in three decades. The focus has switched to how far the BOJ can raise rates before they reach a neutral level, which neither promotes nor cools the economy.

A rise in Japanese interest rates can have an impact on gold prices via numerous interconnected worldwide channels:
• Stronger Japanese Yen (JPY): Higher interest rates usually support the yen. A higher yen frequently results in a lower US dollar, which benefits gold because it is denominated in dollars.
• Global Bond Yield Repricing: Japan’s retreat from ultra-loose policy may cause global bond yields to rise, raising the opportunity cost of owning gold, which might be negative in the short run.
• Carry Trade Unwinding: Higher Japanese interest rates may cause the unwinding of yen-funded carry trades, resulting in market volatility. Such risk-off phases tend to strengthen gold’s position as a safe-haven.
• Capital Flow Shifts: Rising Japanese yields might pull capital back to Japan, affecting global liquidity and boosting volatility, which is frequently beneficial to gold during uncertain times.
In the short term, higher yields may pressure gold, but through currency effects and risk aversion, Japan’s rate hikes can ultimately lend support to gold prices.

Gold is expected to trade in the range of $4290 (~Rs 132,000) to $4400(~Rs 136,000) this week. Buy on dips around support.

For Silver $65(~Rs 200,000) will be a difficult nut to crack. Prices are expected to touch support of Rs $60.50 (~Rs 188,000) before rising higher to resistance.

Dr.Renisha Chainani, Head- Research, Augmont