A sharp sell-off in precious metals continued on Monday, with gold and silver prices extending losses in both domestic and international markets as investors reacted to a stronger US dollar, rising Treasury yields and uncertainty surrounding developments in West Asia.
Traders are also adopting a cautious approach ahead of important US inflation figures and testimony by Federal Reserve Chair Jerome Powell, events that could influence expectations on future interest rate decisions and determine the next move in bullion prices.
On the Multi Commodity Exchange (MCX), gold futures for August delivery slipped to Rs 1,41,915 per 10 grams, down Rs 1,563 or 1.09 per cent during the session. The contract touched an intraday low of Rs 1,41,557, nearly Rs 1,921 below the previous close of Rs 1,43,478.
Silver futures for September delivery also witnessed heavy selling pressure. The contract was trading at Rs 2,17,550 per kg, a decline of Rs 5,114 or 2.30 per cent, after falling to an intraday low of Rs 2,17,277. This represented a drop of nearly Rs 5,387 from the previous closing level of Rs 2,22,664.
The correction has become more pronounced when compared with the highs recorded over the past year. Gold prices are currently trading nearly Rs 62,460 below their 52-week peak of Rs 2,04,375 per 10 grams, a decline of about 30.6 per cent. Silver has recorded an even steeper fall, with prices now lower by approximately Rs 2,36,686 from the metal’s 52-week high of Rs 4,54,236 per kg, translating into a correction of more than 52 per cent.
Market experts attribute the weakness in bullion largely to the strength of the US dollar and the rise in bond yields, which tend to divert investor interest away from non-interest-bearing assets such as gold and silver.According to Manoj Kumar Jain, Director of Prithvi Finmart Commodity Research, volatility in precious metals is likely to remain elevated as global markets continue to track geopolitical developments and economic data releases.
“Gold and silver prices show very high volatility and slipped from their highs amid the escalation of the US-Iran tensions. The dollar index is also trading steady above the 100 mark, and US bond yields are showing strength, limiting gains in gold and silver,” he said.
Jain said the minutes of the latest Federal Open Market Committee meeting were less aggressive than markets had anticipated, offering some support to bullion prices. However, fears of inflationary pressures linked to geopolitical tensions have restricted further upside. Investors are now awaiting US inflation data and comments from Federal Reserve Chair Jerome Powell for clues on the future direction of interest rates and precious metals.
“Gold prices could hold the key support level of USD 3,910 per troy ounce, while silver could hold support at USD 54.40 per troy ounce on a weekly closing basis. The US inflation data and the Fed Chair’s testimony could give further direction to both precious metals,” Jain said.
For the current trading session, he expects gold support in the USD 4,074 to USD 4,040 per troy ounce range and resistance near USD 4,144 to USD 4,180. Silver is expected to find support between USD 59.10 and USD 57.70 per troy ounce, while resistance is likely between USD 61.20 and USD 62.40.
In the domestic market, gold support on MCX is seen between Rs 1,42,400 and Rs 1,41,100 per 10 grams, while resistance is expected around Rs 1,44,400 to Rs 1,45,550. Silver support is projected at Rs 2,20,000 to Rs 2,16,600 per kg, with resistance levels placed between Rs 2,26,000 and Rs 2,28,800.
Despite the sharp decline from record levels, analysts believe the correction could offer opportunities for investors willing to take a long-term view.
“We expect gold and silver prices to remain volatile this week amid fluctuations in crude oil prices, movements in the dollar index, geopolitical tensions and ahead of the US inflation data. Long-term investors could accumulate gold and silver in a staggered manner during this market fall, but traders should wait for some stability before taking fresh positions,” Jain said.
Going ahead, bullion markets are expected to remain sensitive to geopolitical developments, movements in crude oil prices, US economic indicators and changing expectations regarding the Federal Reserve’s interest rate trajectory.
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