MCX gold futures for October delivery were down 0.55% at ₹1.50 lakh per 10 grams, while silver futures for December delivery declined 1.16% to ₹2.33 lakh per kg.
The weakness comes after a sharp fall in global bullion prices in the previous session, with stronger-than-expected US economic data increasing expectations that the Federal Reserve could keep monetary policy tighter for longer.
“MCX gold has continued its negative momentum due to a stronger US dollar and Treasury yields,” said Aamir Makda, Commodity & Currency Analyst – Technical Research at Choice Broking.
He said stronger-than-expected US private-sector employment data had raised inflation concerns and strengthened expectations of further rate hikes by the Fed.
According to Ashish Rajodiya, Head – Commodities at PL Capital, gold was trading around $4,288 an ounce globally, with the dollar index rising to the 101 mark, its highest level in almost two months. The US 10-year Treasury yield was near 5.11%, its highest level since July 2007, he said.
Higher yields can weigh on gold because the precious metal does not offer interest income, while a stronger dollar makes dollar-denominated bullion more expensive for holders of other currencies.
Vedika Narvekar, Research Analyst – Commodities & Currencies at Anand Rathi Share and Stock Brokers, attributed the pressure to stronger US data, rising rate-hike expectations and higher Treasury yields.
Narvekar said the near-term bias remained downward, with a broad trading range of $4,240-$4,320 an ounce for spot gold and ₹1.49 lakh-₹1.52 lakh for MCX gold.
At the same time, geopolitical risks continue to provide some support to bullion. Iran’s President Masoud Pezeshkian warned in his UN General Assembly address that Tehran would not allow freedom of navigation through the Strait of Hormuz while sanctions remain in place.
Rajodiya said the outlook for gold would depend on whether upcoming US economic data continues to remain strong. A further strong reading could put additional pressure on bullion, while signs of a cooling labour market or renewed geopolitical escalation could bring buyers back into the market.
However, Dhruv Joglekar, Assistant Fund Manager at Monarch PMS, pointed to a different structural factor supporting gold. According to Monarch PMS, central banks added a net 23 tonnes of gold in July, while China’s gold holdings have increased for 22 consecutive months.
The firm also noted that gold had continued to rise despite an increase in US real yields, suggesting that the traditional relationship between real yields and gold may have weakened.
“Bonds have become less effective as an insurance asset during the current inflationary environment, while gold has increasingly taken on that role,” Joglekar said.