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The gold and silver market is currently experiencing significant turbulence as prices continue to plummet because of increasing pressure from rising bond yields.
Gold prices opened on the Multi Commodity Exchange (MCX) on Thursday at Rs 58,453 per 10 grams and hit an intraday low of Rs 58,401. In the international market, prices hovered around $1,892.37 per troy ounce. Meanwhile, silver opened at Rs 69,543 per kg and hit an intraday low of Rs 69,376 on the MCX. The price hovered around $22.45 per troy ounce in the international market.
The resilience of the US economy has yet again dented gold’s appeal. As a result, the yellow metal slipped below the key support of $1,900 on Wednesday and traded around $1,892 on Thursday morning.
Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas, said, “The US economy is far from slowing down as housing starts rose 3.9%, industrial production grew by 1%, and manufacturing production advanced by 0.5% during July. The dollar index rallied to a two-month high of 103.59 on Thursday as it becomes evident from the recent data that the Fed will continue to go with ‘higher for longer’ interest rates, which will further fuel a rally in the dollar index to test resistance of 104 in coming sessions. The 10-year US treasury yields at 4.28%, have reached their highest since October-23, as the bond market expects the U.S. economy to face a soft landing if the rate goes higher.”
Gold prices touched five-month lows as the US dollar and Treasury yields gained momentum after recent upbeat economic data added weight to the Federal Reserve’s expectations of continuing its tightening policy.
“We see gold prices remain under pressure due to rising yields, strengthening the dollar on prospects of the hawkish Fed. Gold prices could see some buying interest on safe-haven appeal if the rating agencies are downgrading the US lenders, but the overall trend remains bearish in the yellow metal. Spot gold support is $1885/ $1875 and resistance at $1915/$1930,” said Imran.
The quickening ascent of yields significantly undermines gold’s appeal, weakening its trading value and emphasising this sector’s overall volatility. The silver markets reflect the general sentiment observed in the gold markets, resulting in a down-sloping trajectory.
Manav Modi, Analyst of Commodity and Currency at MOFSL, said, “After better-than-expected US PPI and retail sales data, U.S. single-family homebuilding surged in July. Minutes from the Fed’s July meeting showed “most” policymakers continued to prioritise the battle against inflation, while “some participants” cited risks to the economy of pushing rates too far. Amidst positive data and hawkish comments from Fed officials, the rate probability for a pause in the September meeting fell to ~85% from ~90%. Benchmark 10-year U.S. Treasury yields hit a 10-month high, boosting the dollar to its highest level since mid-June and drawing investors away from non-yielding assets, i.e. gold. Worries about persistently high inflation in Britain grew as key measures of price growth monitored by the Bank of England failed to ease in July despite a sharp drop in the headline inflation rate. Concerns regarding China are also adding pressure on the commodities complex. Focus today will be on Philadelphia fed manufacturing index and weekly jobless claim data.”
This simultaneous dwindling of gold and silver prices requires a careful lens to comprehend this dynamic landscape, with a potential perspective switch for investors in precious metals.
Deveya Gaglani, Research Analyst of Commodities at Axis Securities, said, “Prices broke the critical support zone of the $1900 level in the spot Comex market. Yesterday, in Fed meeting minutes, they adopted a hawkish stance and indicated more rate hikes to control inflation. This uplifted the dollar to a new weekly high of $103.5 and dented the sentiment of Bullion. Prices were down by more than 200 points, settling around the 58700 level in the last session. Gold prices are trading near a one-month low. The daily chart trades below 20 and 60 EMA, and RSI is below its reference line, indicating that price momentum is weak. The immediate resistance zone is seen around 59000 levels. As long as the mentioned level is intact, selling on rallies is advisable on an intraday basis.”
Additionally, Amit Khare, Associate Vice President at GCL Broking, said, “October Gold closed at 58681(-0.49%) and September Silver closed at 69722(-0.33%). Bullions daily charts are trading near the oversold zone. Anytime we can see a short covering rally in bullions. Momentum Indicator RSI also indicates the same. Traders are advised to make fresh buy positions in Gold and Silver near the given support level one with the stop loss of support level two and book near the given resistance levels: Gold October Support 58600/58400 and Resistance 59000/59200. Silver September Support 69500/69000 and Resistance 70500/71000.”
