Why Are Gold and Silver ETFs Soaring on US Fed Rate Cut Hopes?
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Synopsis
As gold and silver prices hit unprecedented heights, investors are keenly anticipating a US Federal Reserve rate cut. This article explores the factors driving this surge, including festive demand and a weakening dollar, and how it impacts exchange-traded funds (ETFs).
Key Takeaways
- Gold prices have surged as investors anticipate a US Fed rate cut.
- Silver ETFs have shown robust growth, with significant returns for investors.
- Market conditions, including a weakening dollar, are driving demand.
- Festive buying has contributed to record high prices for both metals.
- Analysts expect continued volatility influenced by economic indicators.
Mumbai, Sep 2 (NationPress) Gold and silver prices have surged to unprecedented levels, fueled by expectations of a US Federal Reserve interest rate reduction, festive buying, and a weakening dollar, analysts indicated on Tuesday.
In India, the price for 24-carat gold per gram concluded at Rs 10,499 on Monday, as per data from the India Bullion and Jewellers Association (IBJA). The 24-carat gold on MCX was valued at Rs 105,880 per 10 grams, while silver was priced at Rs 1.05 lakh per kilogram.
Spot gold reached a high of $3,493.10 per ounce, nearing its April peak of $3,500.05 at market closure. The December gold futures climbed to $3,546.10 per ounce, with silver hitting $40.84 per ounce, its highest since 2011.
Investors in exchange-traded funds (ETFs) also enjoyed substantial returns, with Nippon India Gold BeES increasing by 1.49% to Rs 86.61, HDFC Gold ETF rising 1.59% to Rs 89.43. SBI Gold ETF jumped by 1.67%, while ICICI Prudential Gold ETF advanced by 1.77%. Gold ETF investors have realized nearly 40% returns over the past year.
Performance in silver ETFs was robust, with HDFC Silver ETF appreciating 4.58% to Rs 119.14. Other ETFs, including ICICI Prudential Silver ETF and UTI Silver ETF, recorded gains exceeding 3.7%.
Silver ETFs have yielded around 36% in returns to investors over the past year, with inflows reaching a three-year high of approximately 800 million ounces in August, bolstered by festive-related purchases.
Analysts attribute this surge to anticipated US Fed rate cuts during the September 17-18 meeting, weak US payroll data, worries about tariff-induced inflation, and rising industrial demand for silver from electric vehicles and solar energy, alongside a five-year supply deficit.
"Gold prices have ascended to a more than four-month peak, nearing the all-time high set in April, supported by a weaker dollar and increasing expectations for a U.S. interest rate cut this month," stated Manav Modi, Analyst – Precious Metal - Research, Motilal Oswal Financial Services Ltd.
"The US dollar remains close to a one-month low against major currencies; following positive growth, the US PCE price index increased by 0.2% MoM and 2.6% YoY, both aligning with expectations," he added.
Rahul Kalantri, VP Commodities, Mehta Equities Ltd, emphasized that the upward trajectory is further bolstered by subdued inflation data, a depreciating U.S. dollar, and growing speculation regarding forthcoming reductions in borrowing costs.
Market participants are eagerly awaiting upcoming US employment statistics for further insights, he noted.
Point of View
It’s evident that the rising prices of gold and silver reflect broader economic trends and investor sentiment. The anticipation of a US Fed rate cut, combined with domestic festive demand, makes this an opportune moment for investors to reassess their portfolios. NationPress will continue to monitor these developments closely.
NationPress
02/09/2025
Frequently Asked Questions
What factors are contributing to the rise in gold and silver prices?
The rise is attributed to expectations of a US Federal Reserve rate cut, festive demand, and a weakening dollar.
How have gold and silver ETFs performed recently?
Gold ETFs have seen returns of around 40% over the past year, while silver ETFs have returned approximately 36%.
What price levels are gold and silver currently at?
Gold is priced at Rs 10,499 per gram in India, while silver is at Rs 1.05 lakh per kilogram.
What is the outlook for future gold and silver prices?
Market analysts expect continued upward trends due to anticipated rate cuts and increasing demand.
How do external economic factors affect gold and silver prices?
Factors such as US payroll data, inflation rates, and currency strength can significantly influence precious metal prices.
