Gold and silver prices continued their downward trend on Monday, extending the decline seen last week as stronger-than-expected US economic data reinforced expectations of further interest rate hikes. The precious metals market remains under pressure from a firm US dollar and rising crude oil prices, which have reduced the safe-haven appeal of bullion.
Gold Price Update
Spot gold fell 0.2% to $4,321.49 per ounce in early Asian trade, after dropping around 3% on Friday to its lowest since March 24. US gold futures for August delivery slipped 0.5% to $4,345.60 per ounce. Analysts expect gold to remain highly responsive to developments in West Asia, fluctuations in crude oil markets, and a packed calendar of economic data releases this week.
Silver and Other Metals
Spot silver declined 0.4% to $67.52 per ounce, while platinum eased 0.2% to $1,773.69. Palladium, however, gained 0.5% to $1,231.51 per ounce. Silver futures for July delivery on MCX fell Rs 18,461, or 7%, to Rs 2.48 lakh per kilogram last week.
Factors Behind the Decline
The weakness in precious metals was driven by several factors:
- Strong US Economic Data: The US economy added robust jobs for a third consecutive month in May, suggesting the labor market remains tight. This gives the Federal Reserve room to maintain a restrictive policy stance amid elevated inflation risks.
- Hawkish Fed Comments: Cleveland Fed President Beth Hammack indicated that persistently high inflation could require rate hikes in the near future, reinforcing market expectations of further tightening.
- Rising Crude Oil Prices: Oil prices climbed over $2 a barrel, intensifying worries that higher energy costs could feed inflation and strengthen the case for additional interest rate increases.
- Firm US Dollar: A stronger dollar weighed on bullion prices, making them more expensive for holders of other currencies.
- Weak Physical Demand: In India, physical demand remained subdued as buyers stayed cautious amid volatile international prices. The rupee's appreciation against the dollar further reduced local gold prices.
Technical Outlook
Pranav Mer, Vice President of Commodity & Currency Research at JM Financial Services, said the near-term trend for gold and silver continues to appear corrective. He noted that both metals faced heavy selling pressure last week, with international gold prices falling below the $4,400-4,500 per ounce range. A sustained break below these levels could keep prices under pressure.
Market Data
Globally, Comex gold futures dropped $227.7 (about 5%) last week to settle at $4,365 per ounce. Silver recorded an even steeper decline, losing $6.77 (nearly 9%) to end at $69.10 per ounce. On the MCX, gold futures for August delivery declined by Rs 5,317 (3.3%) to close at Rs 1.55 lakh per 10 grams.
Central Bank Buying
Data from the People's Bank of China showed that the country's central bank expanded its gold holdings for a nineteenth straight month in May, with reserves increasing to 74.96 million fine troy ounces. This continued buying by central banks provides some support to gold prices.
Key Events to Watch
Market participants will closely track trade and inflation figures from both China and the US, consumer sentiment data from Washington, and India's Consumer Price Index (CPI) readings. Investors will also keep an eye on the European Central Bank's policy decision for signals that could influence precious metals and broader commodity markets.
Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
