Gold and silver prices traded lower in international markets on Tuesday, October 27, as elevated oil prices, inflation concerns and uncertainty over the US Federal Reserve’s interest rate outlook weighed on bullion sentiment.
On COMEX, gold futures were trading at $4,029.70 per ounce, down $8.70, or 0.22%, from the previous close of $4,032.80. Silver futures were at $54.180 per ounce, down $0.161, or 0.30%, from the previous close of $54.075 an ounce, according to data available on October 27.
The movement in international bullion prices comes as investors assess developments in the West Asia and their implications for inflation and interest rates. Oil prices have remained elevated amid the US-Israeli war on Iran, with concerns over disruptions to energy supplies keeping inflation risks in focus.
Brent crude futures were trading near $115 a barrel early on Tuesday, after diplomatic efforts involving Saudi Arabia, Turkey, Pakistan and Iran raised hopes of easing regional tensions.
However, renewed attacks and uncertainty over the security of shipping routes have limited expectations of an immediate resolution.
Why are gold and silver prices under pressure?
Higher crude oil prices can push up inflation expectations, potentially making central banks more cautious about cutting interest rates. This can weigh on gold, which does not pay interest and becomes relatively less attractive when interest rates and bond yields remain elevated.
According to Daniel Munday, Principal Analyst at VT Markets, oil prices remain an important driver of gold, with Brent crude trading above $110 a barrel adding to inflation concerns and influencing expectations of the Federal Reserve’s next moves.
Munday said gold had slipped below the $4,000-per-ounce mark in recent trading, with markets anticipating the Fed’s upcoming policy decision and assessing the possibility of tighter monetary policy later in the year. The central bank’s commentary on inflation is likely to be important for bullion prices.
A stronger US dollar can also weigh on gold by making the dollar-denominated metal more expensive for buyers using other currencies. Meanwhile, easing geopolitical tensions can reduce demand for gold as a safe-haven asset.
Is the recent fall in gold a change in trend?
Gold has retreated from its October record, but some market participants view the decline as a correction following a sharp rally rather than a definitive reversal.
Rajeev Sharan, Head of Research at Brickwork Ratings, said gold had fallen around 5% from its October record, citing profit-booking, a firmer US dollar, elevated US bond yields and reduced expectations of Federal Reserve rate cuts.
He added that easing geopolitical tensions had also reduced safe-haven demand. In the near term, gold could remain volatile, with the Fed’s policy outlook and movements in the dollar likely to influence prices.
For investors considering fresh exposure, Sharan said staggered purchases could help manage the risk of further price fluctuations. Gold, he said, is better viewed as a portfolio diversifier than as a short-term trading opportunity.
What should investors watch next?
Investors will track the Federal Reserve’s policy decision and its guidance on inflation and interest rates, along with movements in crude oil prices, US Treasury yields and the dollar.
Developments in the West Asia will remain relevant because any escalation could increase safe-haven demand, while progress towards de-escalation could ease that support.
For Indian investors, domestic gold prices will also depend on the rupee-dollar exchange rate, import costs and local demand. A weaker rupee can make imported gold more expensive in India, partly offsetting a decline in international prices.
On Monday, October 26, gold of 99.9% purity in New Delhi rose ₹200 to ₹1.46 lakh per 10 grams, while silver remained unchanged at ₹2.02 lakh per kilogram, inclusive of taxes, according to local traders.
Domestic prices may therefore move differently from international benchmarks, depending on currency movements and local market conditions.
-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.