Precious Metal Prices Tumble as Fed Rate Hike Bets Grow
Precious metal prices came under heavy pressure on Friday as rising expectations of a US interest rate hike weighed on both gold and silver. The downturn continued through the festive season, with Dhanteras and Diwali buyers among those benefiting from lower prices.
Indian bullion followed the global trend. On the MCX, gold and silver were down by as much as 3,000 rupees at different points in the session, reflecting the broader weakness in the sector.
In international trading on COMEX, gold dipped about 0.28 percent to $4,020 per ounce. Silver fell 1.20 percent to $51.750 per ounce.
A combination of inflation and growth data has strengthened the case for tighter monetary policy in the United States. US core PCE prices increased 0.3 percent in September, and the annual rate climbed to 3.1 percent. The economy expanded 3.4 percent in the third quarter. Analysts say these figures indicate that the Federal Reserve could keep rates high for a prolonged period.
The market now assigns more than an 80 percent chance to a Fed rate increase in December. This outlook has put pressure on gold, which does not pay interest, while higher bond yields have added to the downward pull.
Domestic gold traded around 1.42 lakh rupees per 10 grams, and silver was near 1.86 lakh rupees per kilogram.
On MCX, December-delivery gold closed the day's lows after sliding more than 800 rupees, or 0.59 percent, from its previous close of 1,42,596 rupees. The intraday low stood at 1,41,753 rupees per 10 grams. Silver posted a bigger loss, falling 3,730 rupees, or 1.96 percent, from 1,89,453 rupees to an intraday low of 1,85,723 rupees per kilogram.
Technical analysts highlight a crucial support band for gold between 1.40 lakh and 1.41 lakh rupees per 10 grams. If this level gives way, prices could decline toward 1.37 to 1.38 lakh rupees. For silver, the 1.83 to 1.85 lakh rupee range per kilogram is seen as the next major cushion.
Silver's long-term trend has also changed sharply. After reaching 4,20,048 rupees per kilogram in late January, a record that broke the 4 lakh rupee barrier, the metal has since lost ground steadily. It now trades at less than half of that lifetime high.
Some market experts feel the current levels may offer value for long-term investors and festive shoppers. Even so, they caution that short-term moves will depend on Federal Reserve policy, the dollar index, US bond yields and crude oil prices.
Geopolitical risks in West Asia, including developments involving Iran and worries over supply constraints, have kept crude oil volatile. Costlier oil may add to inflation, potentially delaying interest rate cuts by central banks. Investors are therefore remaining careful with gold and silver for now.
The next big focus will be the Fed's meeting on December 8-9, alongside fresh inflation and employment figures. Weaker data and fading rate hike expectations could spark a recovery in both metals. Stronger inflation data, however, may push losses further, with silver possibly dropping faster than gold.