Gold and silver prices are extending their bullish momentum this week, driven by a confluence of geopolitical tensions and macroeconomic signals. According to Manav Modi, Senior Analyst of Commodity Research at Motilal Oswal Financial Services Ltd., investors should closely watch several global factors, including an impending US Supreme Court judgment on former President Donald Trump's tariffs.
Geopolitical Tensions and Supply Squeeze Fuel Rally
Escalating uncertainties from global hotspots have injected a significant risk premium into the precious metals market. Beyond the ongoing US and Venezuela issues, recent disruptions in Greenland and heightened tensions involving Iran have further spooked investors. On the fundamental side, the metals complex is grappling with acute supply tightness. This is evident in the persistent backwardation on the COMEX, spot-futures spreads narrowing to near $1, and a sharp contraction in the Shanghai-COMEX arbitrage window to approximately $3–4 from $8 previously. Silver inventories across major exchanges are also witnessing steady drawdowns.
Weak US Data Bolsters Rate Cut Expectations
The macroeconomic landscape is adding to gold's allure. Recent US data showed the ISM Manufacturing PMI slipping into contraction territory, alongside weakening factory orders and job openings falling to a 14-month low. This has reinforced market expectations that the Federal Reserve could deliver multiple interest rate cuts in 2026, even though the CME FedWatch Tool indicates no move is anticipated in January. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, making it more attractive.
Technical Outlook: Buy on Dips Strategy Advised
From a technical perspective, bullion recently retested a crucial support zone near ₹1,36,400, offering a fresh entry point for investors. The broader structure favors a 'buy on dips' approach, preferably through staggered investments. Key support levels are now identified at ₹138,000 and ₹136,000—the latter being a former resistance near the 61.8% Fibonacci extension level and now the mid-range of the Bollinger Band. Following a significant gap-up opening on Monday, analysts suggest that any price retracement towards these supports could be used to initiate buying. The immediate targets are set at ₹142,000 and ₹145,000, which also align with the next resistance zone.
As the new week progresses, the market's focus will shift to key US economic indicators, including Consumer and Producer Price Index (CPI & PPI) data, and speeches from Federal Reserve officials. Alongside these data points, the evolving geopolitical landscape and the US Supreme Court's verdict on Trump-era tariffs will be critical factors influencing gold's trajectory in the near term.
(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)
