COMEX gold was trading at $4,045.20 per ounce, down 0.78%, while COMEX silver slipped 2.16% to $57.445 per ounce in early trade. Gold had settled at $4,083 an ounce in the previous session, while silver had closed at $58.745 an ounce.
The decline comes as markets await the outcome of the Federal Reserve’s two-day policy meeting, which begins on Tuesday (July 28). While the central bank is widely expected to keep interest rates unchanged this week, traders are pricing in the possibility of a rate hike in the coming months.
According to CME FedWatch data, markets now assign a 36.3% probability of a 25-basis-point rate hike, up sharply from 16% a week ago. Expectations for a September rate increase have also strengthened.
Why are gold and silver falling?
Gold typically benefits from lower interest rates because it does not pay interest. Expectations of tighter monetary policy tend to lift bond yields and strengthen the US dollar, making dollar-denominated bullion more expensive for overseas buyers and reducing its attractiveness relative to interest-bearing assets.
The dollar hovered near a one-month high on Tuesday (July 28), adding pressure on bullion prices.
Geopolitical developments, however, continued to offer some support. US President Donald Trump said Washington was holding “good talks” with Iran and there was a chance of reaching an agreement, although he warned military strikes could resume if negotiations failed. At the same time, reports of drone attacks in parts of the West Asia highlighted that regional tensions remain unresolved, keeping safe-haven demand alive.
Volatility is driving buying behaviour
Bindu Sharma, Founder and Creative Director of Mavitrra, said the defining feature of the gold market this year has been price volatility rather than the overall direction of prices.
She said buyers are using price corrections as opportunities to purchase instead of staying away during prolonged rallies. According to Sharma, customer footfall has become more uneven, with demand picking up sharply whenever prices ease and slowing when prices spike again.
She added that jewellers are responding by focusing on transparent pricing, rate-lock facilities at the time of booking and flexible payment options. While wedding and festive purchases continue to support demand, discretionary and gifting purchases have become more sensitive to short-term price movements.
Market remains sensitive to Fed and geopolitical developments
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions and President of the India Bullion and Jewellers Association, said bullion markets have experienced sharp swings as safe-haven buying from West Asia tensions has competed with rising expectations of tighter US monetary policy.
He noted that stronger US economic data boosted expectations of another Federal Reserve rate hike, strengthening both the dollar and Treasury yields, which in turn pressured gold and silver prices.
He identified immediate support for gold in the $3,950-$4,000 an ounce range and resistance around $4,150 an ounce, while silver has support between $56.50 and $57.00 an ounce and resistance between $61.50 and $63.00 an ounce.
-With Reuters inputs
