MCX Commodity Market Outlook: Gold had a remarkable run in July, surging by nearly 2% in India. On the Multi Commodity Exchange of India (MCX), the price of gold climbed by approximately Rs.1,400 per 10 grams throughout the month.

Several factors fueled this rally, bolstering the demand for the precious metal in the global market. The primary catalyst was the growing anticipation that major central banks worldwide, including the US Federal Reserve and the European Central Bank, were nearing the conclusion of their current monetary tightening policies.

Furthermore, the appeal for gold was enhanced by a weaker US dollar following a slower-than-expected rise in US inflation.

Ajay Kedia, Director of Kedia Advisory, commented on the situation, stating, "A less aggressive tone by the US Fed is a significant supportive factor for gold. The weakness in the dollar index added further gains to gold prices. Additionally, Chinese physical gold premiums have surged to a four-month high due to robust demand."

On July 26, the US Federal Reserve raised its benchmark fund rates by 25 basis points to 5.25-5.5%, in line with market expectations. This brought US interest rates to their highest level since 2001 in an attempt to combat sticky, high inflation.

However, the statement by the Federal Open Market Committee (FOMC) hinted that the central bank might consider another pause in its next meeting in September. The US Fed also mentioned that it would closely assess various data points "in determining the extent of additional policy firming."

The latest data showed that US consumer inflation in June cooled to its lowest rate since 2021, with the consumer price index (CPI) rising 3.0% from a year ago, down from 4.0% in May.

With inflation easing in the US, analysts predict that the Fed may be reaching the end of its rate-hiking cycle, which bodes well for the prices of non-interest yielding gold.

Gold Outlook: Moving into August, these favorable factors are likely to continue supporting the price of gold.

However, Kedia suggests that we should keep an eye on the impact of domestic physical demand for gold amid El Nino concerns.

"Physical demand is expected to remain subdued in August, as it is a seasonally weak month for the yellow metal. While the monsoon is supportive, and agricultural sowing has been good, the concerns over El Nino's impact still prevail and could weigh on rural gold demand. This will be a key aspect to look at," added Kedia.

Overall, Kedia expects gold to maintain a positive trend in August, trading within a range of support at Rs.58,150 and resistance at Rs.59,560 on MCX.

Silver Outlook: In contrast, silver outperformed gold last month with an impressive surge of over 8%. The spike in silver prices was driven by increasing industrial demand for the metal and optimism surrounding additional stimulus measures in China. Additionally, gains in the prices of base metals also contributed to improved sentiment for silver.

Meanwhile, the Gold-Silver ratio has been trending below 80 for several months. A decline in the gold-silver ratio signifies a rise in risk-appetite and growing industrial demand for silver, while safe-haven demand for gold weakens. In simple terms, a fall in the gold-silver ratio indicates increasing demand for silver, as explained by Kedia.

Looking ahead, Kedia foresees silver continuing its outperformance against gold, maintaining a positive bias throughout August. Support for silver is expected at the Rs.73,200 level, with resistance placed at Rs.76,800 on MCX for the month, as per the analysis.

Commodity Markets: Gold falls Rs.100, silver declines by Rs.300

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