Gold prices experienced a notable decline on Monday, weighed down by a stronger US dollar and profit-taking activities among investors. This dip in prices comes as market participants await key US economic data that could influence the Federal Reserve’s next steps on monetary policy.
As of 10:04 am, February gold futures were trading at Rs 76,344 per 10 grams on the Multi Commodity Exchange (MCX), marking a decrease of Rs 784 or 1.02% compared to the previous session’s closing price. The precious metal’s performance mirrored a broader trend, as the US dollar gained strength, reducing the appeal of gold for investors holding other currencies.
In the global markets, spot gold saw a decline of 0.7%, dropping to $2,636.38 per ounce, while US gold futures edged down 0.8% to $2,658.80. The strengthening of the dollar index by 9.5% added further pressure on bullion, making it more expensive for holders of other currencies.
Silver Follows Gold’s Downward Trend
Silver, which tends to follow gold’s movements, also saw a substantial fall in prices. As of the same time, silver’s February futures were trading at Rs 90,225 per kg, showing a decrease of Rs 1,009 or 1.11%. The overall decline in silver prices mirrored the weakening sentiment in the precious metals market, further compounded by the US dollar’s strength.
Investors Await Key US Economic Data
Market participants are closely monitoring key economic data set to be released in the coming days, particularly from the United States. Major data points, including US job openings, the ADP employment report, and the highly anticipated payrolls report, are expected to provide fresh insights into the state of the economy.
This data will be crucial for investors trying to gauge the Federal Reserve’s monetary policy decisions. The central bank’s future actions, especially regarding interest rates, have a significant impact on gold and silver prices, which are highly sensitive to shifts in economic policies.
The Federal Reserve’s policy direction is under the spotlight, with some Fed officials scheduled to speak this week. Among them, Fed Chair Jerome Powell is set to address the public on Wednesday, providing more clarity on the central bank’s stance regarding future rate cuts.
Market Expectations on Fed Rate Cut
According to the CME Group’s FedWatch Tool, the markets currently assign a 65.4% probability to a 25-basis-point rate cut in December. The potential for a rate cut has been one of the key drivers behind gold’s recent fluctuations, as lower interest rates tend to increase the appeal of non-yielding assets like gold.
In the context of rising inflation concerns and persistent global economic uncertainty, gold has often been viewed as a safe-haven asset. However, the prospect of higher interest rates under the incoming administration of Donald Trump, coupled with the strong US dollar, has added volatility to the precious metals market.
Gold Registers Worst Monthly Performance Since September 2023
Gold’s performance in November was particularly poor, with prices slipping over 3%. This marked the worst monthly performance for the yellow metal since September 2023, driven largely by the anticipation of higher tariffs under the incoming Donald Trump administration. These tariffs are expected to keep interest rates elevated for a longer period, which in turn has weighed on gold prices.
The combination of a strong US dollar, profit-taking, and the uncertainty surrounding economic policy has created a challenging environment for gold investors. Despite this, the precious metal continues to receive support from concerns over inflation and geopolitical risks, particularly in Europe and the Middle East.
Technical Levels for Gold and Silver
Despite the downward pressure on gold and silver prices, both metals continue to find support at certain technical levels. According to Rahul Kalantri, Vice President of Commodities at Mehta Equities, gold has support at levels between $2,622 and $2,610, with resistance at $2,650-$2,664. In Indian Rupee (INR) terms, gold has support at Rs 76,180-375,950, with resistance lying between Rs 76,570-376,840.
Silver also has well-defined support and resistance levels. Kalantri identified support for silver at $30.15-$29.90, with resistance at $30.60-$30.75. In INR terms, silver’s support is found between Rs 88,150-87,550, with resistance at Rs 89,450-90,080.
These technical indicators provide a framework for investors to track the short-term movements of both gold and silver, while broader market factors, such as US economic data and central bank policy, will continue to play a significant role in shaping the trajectory of the precious metals market.
Outlook for Gold and Silver
The outlook for gold and silver remains uncertain as investors digest the latest economic data and await signals from the Federal Reserve regarding future interest rate cuts. The strong US dollar, coupled with the ongoing profit-taking, has placed downward pressure on gold and silver prices in the short term. However, with concerns over inflation and geopolitical risks still lingering, the long-term demand for gold and silver remains robust.
For gold, the key will be whether the Federal Reserve moves forward with a rate cut in December. If this happens, it could provide a boost to gold prices, as lower interest rates typically increase demand for the precious metal. Additionally, silver’s performance is closely tied to gold, and its price movements are likely to continue to reflect the broader trends in the precious metals market.
Investors should continue to monitor economic data closely and consider both technical and fundamental factors when making investment decisions. As always, the precious metals market remains highly volatile, with sudden shifts in market sentiment having the potential to drive significant price fluctuations.
Conclusion: A Wait-and-See Approach for Investors
In conclusion, gold and silver prices are currently experiencing pressure from a stronger US dollar and profit-taking, with market participants waiting for key economic data to shape the Federal Reserve’s future policy actions. While the outlook for the precious metals market remains uncertain in the short term, longer-term factors such as inflation concerns and geopolitical instability could support prices.
Investors in the precious metals space should take a cautious, wait-and-see approach as they assess the potential impact of upcoming US economic data and the Federal Reserve’s policy decisions. With gold and silver facing technical support and resistance levels, investors should remain alert to market developments that may provide new opportunities or challenges in the coming weeks.
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