Gold futures cross Rs 1.15 lakh/10 gms, silver surges toward Rs 1.35 lakh per kg as traders bet on US rate cuts

Gold, silver prices at all-time highs

Gold and silver prices soared on September 23 after US Federal Reserve Governor Stephen Miran said the American central bank's benchmark interest rate is too high, and should be slashed aggressively.

Gold and silver futures on the Multi Commodity Exchange (MCX) soared to all time highs after his comments before the Economic Club of New York.

Gold at all time high:

The yellow metal's futures contracts with October expiry hit an all time high of Rs 1,14,179 per 10 grams today, breaking the previous record set just yesterday. Gold contracts with December expiry meanwhile trade at a lifetime high of Rs 1,15,139 per 10 grams, as seen at 3 pm.

The futures contracts of the precious metal with February expiry traded at Rs 1,16,350 per 10 grams for the first time ever.

Silver contracts with December expiry hit a lifetime high of Rs 1,34,990 per kilogram. The contracts with March expiry also hit a lifetime high of Rs 1,36,511 per kilogram.

Silver contracts with May and July expiry were also trading at all time high levels.

Federal Reserve Governor Stephen Miran said that his view of monetary policy diverges from the other FOMC members, and he sees the current policy as ‘restrictive’ which risks Fed's employment mandate.

"I believe the appropriate fed funds rate is in the mid-2 percent area, almost 2 percentage points lower than current policy. The Federal Reserve has been entrusted with the important goal of promoting price stability for the good of all American households and businesses, and I am committed to bringing inflation sustainably back to 2 percent. However, leaving policy restrictive by such a large degree brings significant risks for the Fed's employment mandate," he said.

"The upshot is that monetary policy is well into restrictive territory. Leaving short-term interest rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment," he concluded.

After his comments, analysts expect more rate cuts this year. According to the CME FedWatch tool, 89.8 percent of traders are pricing in a 25-basis-point cut by the American central bank at its October FOMC meeting, and 74 percent are pricing in a 50-basis point cut at the December meeting.

What analysts say?

Heightened geopolitical tensions, the prospect of rate cuts and persistent economic uncertainty drove investors toward safe-haven assets, reinforcing bullish momentum in the yellow metal, said Axis Securities. "Attention now turns to the Fed Chair's speech later today, which is expected to add volatility during the evening trade," it said.

"Gold has been subdued following this week's 25 basis point reduction in rates by the Fed. This has been almost entirely due to reaction to the more cautious tone taken by the Fed in its future outlook, less positive than most investors had been anticipating. While in itself, reductions in rates would support gold as it reduces the time-cost of holding non-yielding assets, the Fed highlighted being data-driven and cited policy decisions as being complex, indicating subsequent cuts would be more gradual," said Ross Maxwell, Global Strategy Lead at VT Markets.

"We have seen gold rally due to 2 key factors, first being the need for an alternate the dollar as dollar falls in value and second is more geopolitical with countries looking at decouple themselves from US treasuries. This had led to demand from not only retail and institutional investors but central banks as well," said Shravan Shetty, Managing Director, Primus Partners.

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