Gold and silver are facing a stormy future as the potential of a US Federal Reserve rate hike looms large. Investors witnessed a gloomy start to the day as gold opened on the Multi Commodity Exchange (MCX) at Rs 59,043 per 10 grams, hitting an intraday low of Rs 59,017. Internationally, gold prices wavered around $1,918.65 per troy ounce. The silver market wasn’t spared either, with silver opening at Rs 72,265 per kg and reaching an intraday low of Rs 72,191 on the MCX. Internationally, silver hovered around $23.713 per troy ounce.
The decline in spot gold prices by 0.40% to $1,918.17 was largely attributed to the release of hotter-than-expected US ISM services data for August. The data rekindled concerns over the possibility of a rate hike.
“The US ISM services Index for August came in at 54.50, surpassing estimations of 52.50. This significant improvement from July’s reading of 52.70 raises serious inflation concerns,” warned Praveen Singh, the Associate VP of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas.
Furthermore, new service orders saw an increase from 55 in July to 57.50. This development, coupled with the rise in US yields, bolstered the US Dollar Index and exerted pressure on commodities. While it is uncertain whether the ISM services data will maintain its robust performance due to the substantial support received from the entertainment industry, it is expected to keep both yields and the dollar firm for the time being.
“Two-year US yields closed at 1.39%, marking an increase of 0.60%, while the ten-year yields at 4.29% were up nearly 0.60%. The US Dollar Index showed a slight rise of 0.08% as it reached the key psychological resistance at 105. The Bank of Canada has unwaveringly maintained the benchmark rate, adopting a hawkish approach. Conversely, Germany witnessed an 11.70% m-o-m decline in factory orders in July, and the Euro-zone experienced a 1% y-o-y contraction in July retail sales, slightly better than the forecasted 1.20% decline,” Singh stated.
The morning brought news of China’s trade balance data for August, which was marginally better than expected. As investors keep a watchful eye, the US is poised to release crucial data including initial jobless claims, continuing claims, and the final reading of unit labor costs for Q2. Additionally, the Euro-zone’s final GDP reading for Q2 will be carefully scrutinized.