The glitter of gold dimmed on the Multi Commodity Exchange (MCX) today as prices opened at Rs 59,315 per 10 grams and took a hit, plunging to an intraday low of Rs 55,9004. On the international stage, the precious metal hovered around $1,931.85 per troy ounce. Simultaneously, silver opened at Rs 72,970 per kg on the MCX, only to tumble to an intraday low of Rs 72,195. In the global market, silver prices held steady at around $23.20 per troy ounce.
Anuj Gupta, Head of Commodity and Currency at HDFC Securities, noted that gold had closed marginally higher by 0.21% at 59405, driven by demand amid global market uncertainties. However, Gupta cautioned that the challenge for gold had intensified, mainly due to the Dollar Index’s resurgence to a one-week high, surpassing the 105 mark. Internationally, gold was trading at $1926 levels, and Gupta predicted a trading range between $1920 to $1940 levels, with MCX expected to follow suit between 58800 to 59300 levels. He added that gold might test $1920 to $1915 levels as the dollar index strengthened following a hawkish statement from the Federal Reserve.
Praveen Singh, Associate VP, Fundamental Currencies, and Commodities at Sharekhan by BNP Paribas, explained that traders had initially pushed gold prices towards $1950, expecting the Federal Reserve to signal a pause in its rate hike campaign. However, a more hawkish monetary policy stance and commentary from the Federal Open Market Committee (FOMC) derailed those hopes, causing gold to close at $1931.
Today, all eyes in the financial markets are on the Bank of England’s monetary policy decision. Any indication of a dovish 25 bps hike will likely put further pressure on the Sterling Pound.
Gold’s Vulnerability Exposed as Yields and Dollar Strengthen
Gold finds itself in a precarious position as bond yields and the U.S. dollar surge, driven by a Federal Reserve announcement signaling another rate hike this year and a tighter monetary policy through 2024.
Manav Modi, an Analyst in Commodity and Currency at MOFSL, reported that the U.S. dollar index had climbed by 0.4%, reaching its highest level since March 2023. Simultaneously, two-year Treasury yields soared to a 17-year high, following the Fed’s revised expectations for rate hikes. The Federal Reserve has charted a more stringent policy path in its fight against inflation, expressing confidence that it can rein in rising prices without harming the economy or causing significant job losses.
In a notable adjustment, the Fed lowered its core inflation forecast for this year from 3.9% to 3.7% while significantly increasing its growth forecast to 2.1% from 1%. Despite the hawkish stance, the CME Fed-Watch tool continues to suggest a more than 70% probability of a pause in the November Fed meeting.
Modi also pointed out that all eyes will be on the Bank of England’s announcement regarding its interest rate hike strategy, adding to the day’s economic suspense. Additionally, market participants will closely monitor the U.S. weekly jobless claims and the Philadelphia Fed manufacturing index for further insights into the evolving economic landscape.