Silver extends rally to hit fresh all-time high, gold loses shine: What lies ahead?

Gold and silver

Silver prices continued to record significant gains on June 18, as multiple triggers continued to boost the white metal. Gold however extended losses, despite rising geopolitical tensions in the Middle East.

Silver hits all-time high on MCX:

Silver futures with July expiry hit a lifetime high of Rs 1,09,748 per kg on MCX today, breaking the previous record which was set just yesterday. The derivative contracts are now nearly 25 percent higher than the lifetime-low level of Rs 88,050 per kg. Silver futures with September futures hit a higher all-time high of Rs 1,11,000 per kg on the exchange today.

Gold futures extend decline:

Gold contracts on the MCX meanwhile declined. The yellow metal's futures with August expiry dropped around 0.2 percent to hover around Rs 99,329 per 10 grams, extending losses. This comes days after gold futures crossed the Rs 1 lakh mark for the first time ever on MCX.

Gold-silver ratio drops:

Gold-silver ratio has also declined significantly, tracking the rise in silver and fall in gold’s prices. The ratio is currently hovering around 91, after remaining above the key 100-level for several sessions during April and May. The gold-silver ratio represents how many ounces of silver it would take to buy an ounce of gold.

What to expect?

"Gold prices traded in a narrow range as investors await the US Federal Reserve’s policy decision, scheduled for 11:30 PM IST…Market participants are closely watching three key macro triggers: The US Fed’s interest rate decision, geopolitical tensions between Iran and Israel, and progress in global trade negotiations. These factors are expected to drive volatility and set the directional tone for gold. The current trading range for gold is seen between Rs 98,500 to Rs 1,00,500 in the near term," said Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities.

Tata Mutual Fund however remained bullish on gold. "We see limited downside and one may watch for any decline for a buying opportunity. Central bank buying and US Fed rate decision are the long term supporting factors for gold as a strategic asset allocation," it said.

Speaking about silver's outlook, Tata Mutual Fund said, "Silver prices may trade firm over the short term on favorable gold/silver ratio and supportive fundamentals. Silver is a developing growth story and the trend is highly depended on broad recovery in industrial demand. One can look for decline to enter as a tactical investment for the medium term."

Also read: Weighed by global conflicts, central banks see gold reserves on the rise

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