Gold prices extended their rally on Wednesday, trading near $4,400 per ounce after posting their strongest weekly gain since January, according to Business-Today. While silver has outperformed gold so far this August, profit-taking risk is now rising, said Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Shares and Stock Brokers.
Gold Breaks Out of Consolidation
Business-Today reported that gold finally broke out of its long consolidation range last week, gaining over 7% — its strongest weekly rise since January. The rally has continued this week, with gold now up around 8.7% this month and trading near $4,400/oz. The move is supported by a weaker dollar, falling expectations of a September Federal Reserve rate hike, renewed ETF buying, and continued central-bank and Chinese demand.
Global gold ETF holdings added another 22 tonnes in the week ended August 7, while China's central bank extended its buying streak to 21 months, adding around 640,000 ounces in July, according to Business-Today. Weak U.S. jobs data pushed September Fed-hike odds down to around 44% from 55%. In simple terms, gold now has support from both fundamentals and fresh investor money, making the recent breakout look more convincing than earlier attempts.
Silver Outperforms, But Profit-Taking Risk Rises
Silver has significantly outperformed gold, gaining around 13% in August compared with roughly 9% for gold, reflecting its higher-beta characteristics, according to Business-Today. The gold-silver ratio has fallen to around 67, with the near-term possibility of moving towards 64. However, silver now appears increasingly stretched relative to gold: current correlations suggest the metal is trading at a premium of roughly $9 per ounce to levels implied by gold.
Silver's sharp outperformance means near-term upside could become more limited and profit-taking risk is rising, Vedika Narvekar of Anand Rathi said.
Key Levels and Data to Watch
The key trigger this week is the U.S. Consumer Price Index (CPI), expected at around 3.4% year-on-year for July. A softer number could further support gold, while a hotter print could revive Fed-hike bets, according to Business-Today. On the technical front, $4,400 is the key hurdle for gold to continue the rally, while $4,200 is the strong support: holding above this level keeps the breakout intact.
| Metal | Current Price | Support 1 | Support 2 | Resistance 1 | Resistance 2 |
|---|---|---|---|---|---|
| Gold (Spot, USD) | $4,400/oz | $4,290 | $4,200 | $4,500 | $4,580 |
| Gold (INR) | — | Rs 1,50,800 | Rs 1,47,600 | Rs 1,57,600 | Rs 1,60,900 |
| Silver (International, USD) | $65.30/oz | $62.50 | $61 | $67.50 | $70.50 |
| Silver (INR) | — | Rs 2,27,200 | Rs 2,21,700 | Rs 2,45,400 | Rs 2,56,300 |
For silver, support is at $62.50 and $61, with resistance at $67.50 and $70.50, the report stated.
Price Outlook: Positive Bias, Awaiting CPI
The overall setup remains positive, according to Business-Today. Central-bank buying, improving ETF flows, strong Chinese demand, a softer dollar, and lower Fed-hike expectations are supporting gold. The immediate risks are a hotter U.S. inflation number or a renewed rise in oil prices, which could push yields and the dollar higher. Technically, prices are near the breakout level of $4,400 with $4,490/$4,580 as the next upside levels. As long as gold holds above $4,200, Narvekar said the positive view remains.
A softer CPI number could further support gold, while a hotter print could revive Fed-hike bets, according to Business-Today. On technicals, $4,400 remains the key hurdle for the rally to continue, with $4,200 as the strong support that keeps the breakout intact.
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