Gold and silver prices languish near seven-month lows

Gold opened on the Multi Commodity Exchange (MCX) on Wednesday at Rs 56,853 per 10 grams and hit an intraday low of Rs 56,775. In the international market, prices hovered around $1,821.75 per troy ounce. Meanwhile, silver opened at Rs 67,024 per kg, hit an intraday low of Rs 66,901 on the MCX, and hovered around $21.08 per troy ounce in the international market. 

Gold and silver prices languished near seven-month lows, weighed down by a robust dollar and elevated bond yields as the likelihood of US interest rates staying higher for longer dominated sentiment. 

Manav Modi, Analyst, Commodity and Currency, MOFSL, said, “The dollar index continues to hover above 107 mark, i.e. 12 months high, while US. 10-year yield was above the 4.7% mark.” 

On the data front, U.S. job openings unexpectedly increased in August, pointing to tight labour market conditions that could compel the U.S. Federal Reserve to raise interest rates next month. Fed officials say monetary policy will need to stay restrictive for “some time” to bring inflation back down to its 2% target. These comments are firming market expectations regarding one more rate hike in the next meeting itself. 

Modi says, “The CME Fed-Watch tool suggests that bets for a pause in November meeting has dropped from around 90 per cent to 70 per cent. After positive jobs data, focus now shifts to US private payroll and services PMI data scheduled later in the day.” 

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The Reserve Bank of India (RBI) is expected to keep its policy rate and stance unchanged at its upcoming meeting. “The bigger concern is if the RBI opts for a CRR rate hike to tighten liquidity and improve transmission, after introducing the ICRR in the last policy. We think it is unlikely that the central bank would look at tightening liquidity through more permanent measures like CRR at this stage,” Modi said. 

Anuj Gupta, Head of Commodity and Currency at HDFC Securities, said, “In our view, the RBI could opt for fine-tuning operations (VRR, VRRR) to manage liquidity conditions. We expect the RBI to continue to sound cautious in the upcoming meeting in terms of inflation risks and push back against any rate cut expectations. Further, we do not expect any change in RBI’s macro projections for now.” 

Amit Khare, Associate Vice President at GCL Broking, said, “December Gold closed at 56927 (-1.17 per cent), and December Silver closed at 67494 (-3.52 per cent). As per the daily chart Bullions are trading at a highly oversold zone. Anytime we can see a good short covering rally in bullions. Momentum Indicator RSI also indicates the same. So traders are advised to make fresh buy positions in Gold and Silver near given support level one with the stop loss of support level two and book near given resistance levels: Gold December Support 56700/56400 and Resistance 57000/57200. Silver December Support 66800/65800 and Resistance 68000/68500.”