Gold and Silver Prices Slide Amid US Interest Rate Uncertainty
Gold and silver prices took a hit on Tuesday, influenced by uncertainty surrounding potential interest rate cuts by the US Federal Reserve as well as weak global cues. Both precious metals traded lower in both spot and futures markets.
Gold Futures on MCX Drop
In the futures trade on the Multi Commodity Exchange (MCX), gold for August delivery saw a decrease of Rs 122 or 0.17 per cent at Rs 71,532 per 10 grams. The precious metal hit a low of Rs 71,432 per 10 grams at one point during the day. Silver prices also experienced a decline in both spot and futures markets, with silver contracts for September delivery falling by Rs 81 to Rs 89,669 per kg on the MCX.
Mixed Movements in Different Markets
In spot markets in Mumbai, gold traded at Rs 71,692 per 10 grams, while silver was quoted at Rs 88,015 per kg. In the national capital, local markets showed gold almost flat at Rs 74,250 per 10 grams and silver at Rs 90,000 per kg.
Insight into the Market Trends
Market analysts are closely monitoring the situation, noting that gold prices continue to trade within a narrow range. Uncertainty about rate cut expectations, along with US economic data points, are keeping market participants on edge. Additionally, limited updates on geopolitical tensions have weighed on sentiment. However, the emergence of safe-haven demand amidst challenging political landscapes in the UK and the upcoming US elections are helping to cushion prices.
Looking Ahead
In the overseas markets, both gold and silver were trading lower, with gold at USD 2,329.60 per ounce and silver at USD 29.54 per ounce. Market participants are eagerly anticipating US Federal Reserve Chair Jerome Powell’s speech, as well as upcoming key data releases, such as the US non-farm payroll and factory orders data and the Federal Open Market Committee (FOMC) meeting minutes.
Market Expectations
Experts are forecasting that gold will range trade with a slight positive bias ahead of key US data releases like ADP employment, ISM services, and nonfarm payroll reports, which could impact interest rates and consequently gold prices. The US Federal Reserve’s reluctance to commit to a specific date for cutting interest rates has trapped gold in a range. However, traders are optimistic about a potential interest rate cut at the September meeting.
Additional Insight:
It is worth noting that interest rates play a significant role in determining the price of gold and silver. When interest rates are cut, the opportunity cost of holding non-interest-bearing assets like gold decreases, making them more attractive. This inverse relationship between interest rates and gold prices often leads to fluctuations in the precious metals market.
