Gold and silver prices traded higher on the Multi Commodity Exchange (MCX) on Wednesday, November 11, recovering some of the losses recorded in the previous session.
Silver led the rebound, gaining more than 2%, while gold rose nearly 1%.
On MCX, December gold futures were trading at ₹1.41 lakh per 10 grams, up 0.81%. December silver futures climbed 2.71% to ₹1.87 lakh per kg.
The recovery follows a sharp sell-off on Tuesday (November 9), when bullion prices fell nearly 3% after stronger-than-expected US inflation data strengthened expectations of further interest rate hikes by the US Federal Reserve.
Why are gold and silver prices rising today?
The rebound in domestic bullion prices follows a recovery in international markets. Spot gold rose 0.3% to $4,044.56 per ounce, while US gold futures gained 0.6% to $4,052.50 an ounce on Wednesday (November 10).
Silver also recovered, with spot prices rising 2% to $52.52 per ounce.
Market participants attributed the recovery partly to technical buying after Tuesday’s sharp decline. However, gains remained sensitive to expectations around US monetary policy.
According to Vikram Subburaj, CEO of Giottus.com, silver led the recovery as India’s bullion futures market returned to its regular morning trading session on Wednesday.
How is US inflation influencing bullion prices?
US inflation data has emerged as an important factor for gold and silver prices.
US consumer inflation rose 0.4% in October, against market expectations of 0.3%. The higher-than-expected reading strengthened expectations that the Federal Reserve could raise interest rates in December.
According to CME’s FedWatch tool, traders were pricing in a 100% probability of a rate increase next month, compared with 84% before the inflation data.
Higher interest rates generally weigh on gold because the metal does not offer interest income. When interest rates rise, interest-bearing assets such as bonds can become more attractive relative to non-yielding bullion.
The inflation data also pushed the US two-year Treasury yield up 18 basis points to 4.73% on Tuesday, adding pressure on precious metals.
Why did silver recover faster than gold?
Silver has recovered a larger portion of its previous session’s losses than gold.
Gold, meanwhile, was still nearly $60 an ounce below its pre-inflation-report settlement level.
This indicates that silver has recovered most of Tuesday’s decline, while gold has regained less than a third of its losses.
However, both metals remain sensitive to movements in US bond yields, interest rate expectations and the dollar.
What should Indian buyers watch?
Apart from international bullion prices, movements in the rupee against the US dollar can influence domestic gold and silver rates.
India imports a significant portion of its gold and silver requirements. A stronger rupee can reduce the rupee cost of importing bullion, potentially moderating domestic price increases even when international prices rise.
Subburaj said an expected strengthening of the rupee could soften the impact of higher international bullion prices on Indian buyers.
Investors will also track upcoming US economic data, particularly Friday’s (November 13’s) producer price index (PPI) report, for further indications of inflation trends and the Federal Reserve’s likely policy direction.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.