New Delhi, August 29: Precious metals faced significant pressure this week due to the U.S. Federal Reserve’s stringent stance and stronger-than-expected economic data. Over the week, gold prices fell by approximately 1.86%, while silver also showed weakness.
On the Multi Commodity Exchange (MCX), gold futures for October delivery closed at ₹1,56,281 per 10 grams on Friday (August 28), reflecting a decline of about ₹2,600 or 1.6%. The previous week, gold was priced at ₹1,62,438 per 10 grams, marking a total drop of ₹6,157 or 3.79% over the week.
In terms of silver, the MCX saw September delivery silver close at over ₹4,000 lower, approximately 1.7% down, at ₹2,36,704 per kilogram on Friday (August 28). The previous week, silver was priced at ₹2,46,630 per kilogram, indicating a weekly decline of ₹9,893 or 4.01%.
According to the Indian Bullion and Jewelers Association (IBJA), the price of 999 purity gold on Friday (August 28) was ₹1,59,578 per 10 grams, down from ₹1,60,620 per 10 grams the previous week, a decrease of ₹1,042 or 0.64%.
Similarly, the price for 999 purity silver was ₹2,43,892 per kilogram on Friday (August 28), compared to ₹2,46,630 per kilogram the previous week, resulting in a drop of ₹2,738 or 1.12%.
Experts noted that markets interpreted the U.S. Personal Consumption Expenditures (PCE) inflation data for July and the speech by Federal Reserve Chair Kevin Warsh at the Jackson Hole conference as signals of a tighter monetary policy. This shift altered investor expectations regarding interest rates and increased pressure on gold and silver, traditionally viewed as safe investments.
On Friday, gold futures for October delivery on the MCX fell by 1.63% to ₹1,56,400 per 10 grams. Meanwhile, silver for September delivery dropped by 1.66% to ₹2,36,651 per kilogram.
Data from the IBJA indicated that the price of 24-carat gold was ₹1,59,578 per 10 grams on Friday, down from ₹1,62,603 per 10 grams at the start of the week, highlighting a notable decline in gold prices throughout the week.
Initially, gold prices surged in the early days of the week due to rising concerns over the depreciation of the U.S. dollar and potential government support for long-term U.S. bonds, pushing gold to several months’ highs. However, strong economic data later shifted market sentiment.
The PCE inflation rate in the U.S. for July was recorded at 3.7%, exceeding market expectations. Additionally, employment and business-related data indicated the strength of the U.S. economy, leading investors to believe that the Federal Reserve might maintain high interest rates for an extended period.
Following Warsh’s speech, there was a significant shift in market expectations regarding interest rates. Analysts noted that within minutes of his address, gold prices in the international market fell by nearly $70 per ounce, although some recovery was observed later. Silver also lost its initial gains during the week.
Market participants now believe that the likelihood of an interest rate hike in the U.S. in September has increased compared to earlier expectations. This has prompted investors to take profits from non-yielding assets like gold.
Additionally, a decline in crude oil prices provided limited support for gold. Recent diplomatic progress around the Strait of Hormuz has led to a decrease in oil prices from recent highs, alleviating some global inflation concerns.
Technical analysis suggests that the nearest resistance level for COMEX gold in the international market is between $4,600 and $4,630 per ounce, while significant support may be found between $4,500 and $4,470 per ounce.
In the domestic market, the MCX sees a major resistance area for gold at ₹1,59,200 to ₹1,60,000 per 10 grams. Conversely, immediate support is viewed in the range of ₹1,56,200 to ₹1,55,500.
Experts believe that the direction of gold prices in the coming days will largely depend on U.S. interest rates, inflation data, and signals from the Federal Reserve’s policy. If the U.S. economy remains robust and the likelihood of sustained high interest rates increases, gold may continue to face pressure in the short term.
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