Fragments:
Q. The dollar index has been quite volatile lately, going from a three-month high to a sharp decline within days. What is causing these wild swings, and how do you expect this volatility to evolve in the coming weeks?
Naveen Mathur: At the end of September, the dollar index stood at around 96.22 and rose to 99.56 on October 9, driven by easing geopolitical tensions and US tariff measures. It later dropped to 98.92, but is still up about 1.28% week-on-week.
The recent moves were largely the result of a weaker euro, influenced by political developments in France, and an easing position in Japan, which put pressure on the yen. These factors boosted the dollar. Going forward, I expect high volatility, with the dollar index likely to trade between 96-97 on the downside and 99-100 on the upside, although breaching 100 seems unlikely this week.
Q. Tariff tensions between the US and China are resurfacing, as is the ongoing US government shutdown. How will these factors impact the dollar in the short term?
Naveen Mathur: The ongoing US shutdown has put pressure on the dollar, along with renewed tariff issues with China. Political developments in Japan and France also play a role. US consumer confidence fell slightly to 55 in early October, while one-year inflation expectations eased to 4.6%. While the dollar can benefit from the weakness of other currencies, the shutdown and trade uncertainties will keep the market volatile.
Q. The rupee recovered slightly last week. Can this momentum sustain, and how do you see the overall currency ecosystem, including FPI and domestic equity inflows?
Naveen Mathur: The recent movements of the rupee suggest that the RBI has actively intervened to keep the currency anchored at levels it deems appropriate. The central bank seems comfortable with the rupee trading around ₹87-88 per dollar where it can maintain some stability.
The direction of the rupee will largely depend on the movement of the US dollar given our strong correlation. The euro also plays a role, but to a lesser extent.
I expect the rupee to trade within a narrow range, between ₹87.50 and ₹88.50. Valuation towards 87.50 is possible, while depreciation above 88.50 seems limited for the time being. The current market price of around €88.77 indicates consolidation near these levels.
Q. Gold and silver have both risen sharply this year; gold has risen for eight weeks in a row, although we have seen periods of profit-taking. Do you see more upside potential, or should a correction happen soon?
Naveen Mathur: Ongoing uncertainty surrounding trade rates, especially between the US and China, continues to support gold as a safe haven. If the dollar weakens somewhat, it would provide a further boost to dollar-denominated commodities such as gold.
Since the rupee is unlikely to appreciate much, domestic gold prices should also remain stable. With the holidays approaching, there is strong retail interest, although high prices have prompted some buyers to switch to silver, a trend we have seen in recent years.
Silver is also on the rise. Prices recently broke past their 2011 highs, crossing $50 per ounce internationally and reaching around ₹1,53,400 per kg in India on October 9. Physical silver supply remains tight globally, with production in short supply for the past four to five years.
Falling inventories on the London Metal Exchange (LME), now almost half of what they were at the start of the year, reflect this shortage. Many traders moved silver to the US before the rate changes occurred, further reducing the available supply.
So both gold and silver are receiving strong fundamental support from supply constraints, safe haven demand, ETF inflows and central bank purchases. However, we could see short corrections as investors book profits at higher levels before the uptrend resumes.
Q. What are your key levels and outlook for gold and silver next week?
Naveen Mathur: I recommend a buy-on-dips strategy for both metals.
- Gold (MCX December contract):
- Current Price: Approximately ₹1,23,700 per 10 grams
- Support levels: ₹1,21,200 and ₹1,20,000
- Resistance levels: ₹1,24,600 and ₹1,25,400
- Traders can buy close to ₹1,23,500 with a stop loss of ₹1,23,000, targeting around ₹1,24,500.
- Silver (MCX December contract):
- Current Price: About ₹1,52,000 per kg
- Support levels: ₹1,50,000 and ₹1,48,000
- Resistance levels: ₹1,56,000 and ₹1,58,000
- Buy around ₹1,51,000 with a stop loss of ₹1,50,000 and target close to ₹1,53,000.
Overall, both gold and silver remain in a positive long-term trend, with corrections providing buying opportunities.
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