Gold, silver could shine brighter

The rally in precious metals continued into September.

- DEVANGSHU DATTA

International gold spot prices tested $3,600/oz and futures surpassed $3,650/oz, due to a combination of weak jobs data from the US labor market and expectations that the US Federal Reserve may be inclined to ease.

The yellow metal gained more than 4 per cent in the first week of September, taking year-to-date gains above 36 per cent. Momentum accelerated as geopolitical risks intensified, with fresh Russian strikes in Ukraine. Disappointing US data fueled the rally with very weak employment data. Weak labor data could trigger the Fed into three 25 bps cuts this year, weakening the dollar and lowering Treasury yields, which would be supportive of gold price.

Treasury yields fell sharply, with the 10-year US Treasury dropping below 4 per cent, and the US dollar weakened, deepening bullish trends in gold. The international price of gold is USD-denominated and hence, dollar weakness tends to trigger higher prices. Investor consensus also favors a 25 bps September rate cut, with some optimists even betting on a bigger 50 bps cut.