Gold and silver prices edged higher in early Asian trade on Monday, November 2, after both precious metals recorded sharp losses last week. However, the modest recovery comes against the backdrop of persistent selling pressure, changing interest-rate expectations and uncertainty over global economic and geopolitical developments.
On the COMEX, gold futures were trading at $3,919.70 per ounce, up $20.80 or 0.53%, while silver futures gained $0.629, or 1.28%, to $49.905 per ounce, according to the latest available market data on November 2.
The recovery follows a weak week for bullion.
On the Multi Commodity Exchange (MCX), December gold futures declined ₹3,539, or 2.5%, to close at ₹1.38 lakh per 10 grams last week. Silver futures fell ₹16,587, or 8.5%, to ₹1.79 lakh per kg.
Overseas, December gold futures on COMEX lost nearly 3% during the week to settle at $3,898.90 per ounce, while silver declined around 9% to $49.27 per ounce.
Why have gold and silver prices been falling?
Selling pressure and liquidation in global markets
One factor behind the recent weakness in bullion has been selling across global financial markets.
According to Pranav Mer, Senior Vice President, EBG – Commodity & Currency Research, JM Financial Services, gold and silver witnessed liquidation towards the end of last week following a sharp sell-off in global and US information technology stocks.
He said some investors may have sold bullion to meet margin calls, reflecting the possibility of forced selling to raise cash during a period of volatility.
This is relevant because gold is generally considered a safe-haven asset, but it is not immune to selling when investors need liquidity or face losses in other parts of their portfolios.
Interest-rate expectations remain important
Expectations around US monetary policy are another factor influencing precious metals.
Gold does not generate interest income. Consequently, higher interest rates can increase the opportunity cost of holding gold, making interest-bearing assets relatively more attractive.
Market expectations of further US Federal Reserve rate hikes have therefore remained an important consideration for bullion investors.
According to the latest market assessment, interest-rate futures continue to reflect expectations of further tightening, although the amount of rate increases priced in has moderated compared with a month ago.
The direction of US inflation, employment and economic growth data will be important in determining how monetary policy expectations evolve.
Elevated crude oil prices add to market uncertainty
Crude oil prices have also been influencing the broader commodity market.
Brent crude has remained elevated, trading above $110 per barrel in early Monday trade, following a substantial increase during October.
Mer noted that bullion and crude oil have shared a strong negative correlation over the past six to eight months.
Higher crude prices can add to inflation concerns and influence expectations around interest rates. This, in turn, can affect the attractiveness of non-interest-bearing assets such as gold.
Geopolitical developments involving the US, Israel and Iran could further influence crude prices and precious metals.
Broader investor sentiment and market positioning
The recent correction also comes amid concerns about the sustainability of investments in artificial intelligence and the scale of spending by large technology companies.
A sell-off in technology stocks and uncertainty over corporate earnings have added to volatility across financial markets.
Although gold is traditionally viewed as a hedge against uncertainty, its price can also be influenced by investor positioning, liquidity requirements and movements in other asset classes.
What should investors watch this week?
Several global developments could influence gold and silver prices in the coming sessions.
US midterm elections: The November 3 election outcome and subsequent policy developments could influence market sentiment and geopolitical expectations.
US employment data: The non-farm payrolls report, scheduled for Friday (November 6), will be closely watched for signals on the health of the US labour market and the Federal Reserve’s policy outlook.
Manufacturing and services activity: Purchasing Managers’ Index (PMI) readings from major economies will provide clues about economic activity and demand conditions.
Eurozone inflation: Inflation data from the euro area could influence expectations around the European Central Bank’s monetary policy.
Geopolitical developments: Any escalation in tensions involving the US, Israel and Iran could affect crude oil prices and demand for safe-haven assets.
Can gold and silver prices recover?
Analysts expect volatility to remain elevated, with the near-term direction of precious metals likely to depend on global macroeconomic developments, geopolitical risks and investor positioning.
Pranav Mer said any escalation involving the US, Israel and Iran could sharply push up crude oil prices, while risk assets and commodities could face further selling and liquidation.
Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said developments surrounding US election-related uncertainty and tensions between Washington and Tehran could trigger intermittent demand for precious metals. However, he added that the broader price direction would largely depend on macroeconomic factors.
For investors tracking bullion, the distinction between a short-term recovery and a sustained reversal in the trend will be important. A modest bounce after a sharp correction does not, by itself, establish that selling pressure has eased.
-With agencies inputs
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.