Spot gold rose by 0.4 per cent to $2,338.67 per ounce as the US dollar index slipped by 0.3 per cent, making gold relatively cheaper for other currency holders. US gold futures also saw an increase of 0.2 per cent to $2,340.40. Although gold hit a peak of $2,449.89 on Monday, it has since dropped by over $100 and is set for a three per cent decline this week, marking its most significant weekly drop since early December.
Spot silver increased by 1.3 per cent to $30.49, hitting an 11-year high on Monday. Platinum rose by 1.2 per cent to $1,030.90, while palladium fell by 0.3 per cent to $966.25. Despite this, all three metals are on track for weekly losses. On the domestic front, gold futures witnessed a decline of 0.42 per cent at ₹71,279 per 10 grams on the multi-commodity exchange (MCX).
Why is gold reeling under pressure?
Analysts have observed a decrease in interest from Western investors due to uncertainty surrounding when the Fed will cut rates. However, there is optimism that once the Fed enacts rate cuts, these investors will increase their exposure again.
The Federal Reserve’s meeting minutes indicated that achieving a two per cent inflation target could take longer than anticipated. Market bets are signaling doubts about the Fed cutting rates more than once in 2024, with a 63 per cent chance of a rate cut by November, according to the CME FedWatch Tool.
Despite the uncertainty regarding the US rate outlook, gold prices have seen a 13 per cent increase this year, driven by strong Chinese demand and ongoing geopolitical tensions.
Some analysts have highlighted the potential for lower gold purchases from Chinese retail investors in the second half of the year as the government focuses on reinvigorating the economy. This shift in demand could bring the discussion back to Western investors and the impact of Fed rate cuts.
Where are prices headed?
Gold and silver prices faced a substantial selloff in the past two trading days, with gold dropping by over $100 per ounce and silver plummeting by approximately $2.50 per ounce. In the Indian market, gold experienced weakness this week, witnessing a significant decline from ₹74,350 to ₹71,500.
Despite this downward trend, the overall gold rally remains robust, and this week’s decline presents a buying opportunity, with a base support level at ₹69,000. Analysts believe that if prices fall below ₹69,000, a further selloff towards ₹66,000 could be anticipated.
The rebound of the dollar index post the FOMC meeting minutes, coupled with gains in U.S. 10-year bond yields, contributed to lower gold and silver prices. Moreover, the decline in US jobless claims from 232,000 to 215,000 added pressure on gold and silver prices. However, strong demand from global central banks and geopolitical tensions may provide support at lower price levels.
According to analysts, gold has support at $1,312-$1,288 and resistance at $1,345-$1,361. For silver, support lies at $29.90-$29.75, and resistance at $30.51-$30.70. In the Indian market, gold has support at ₹71,280-₹71,050 and resistance at ₹71,840-₹72,050. Silver, on the other hand, has support at ₹89,550-₹89,100 and resistance at ₹91,140-₹91,780.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. It is advisable for investors to consult certified experts before making any investment decisions due to rapidly changing market conditions and individual circumstances.
Additional Insight:
– The shift in focus from Western to Chinese investors and the potential impact of government policies on the gold market highlight the complexities of the global commodity landscape.
– Geopolitical tensions and central bank actions continue to play a crucial role in shaping gold and silver prices, emphasizing the interconnectedness of global financial markets.
