Gold and silver prices experienced an uptick on the Multi Commodity Exchange on Thursday, attributed to a decline in the dollar from an 18-month high. Traders are currently assessing the likelihood of an additional rate hike by the US Federal Reserve following the publication of the minutes from the central bank’s recent policy meeting. In the domestic market, MCX gold futures with December expiry increased by Rs 557, reaching Rs 1,49,660 per 10 grams. The gold futures with February 2027 expiry, meanwhile, increased by Rs 705 to Rs 1,51,880 per 10 grams. Silver futures on the commodity exchange with December expiry increased by Rs 327, reaching Rs 2,23,888 per kilogram. The contracts with March 2027 expiry increased by Rs 520, reaching Rs 2,30,320 per kg.
Gold prices increased in the international market, aiding the precious metal in its recovery from a two-month low. Spot gold experienced an increase of 0.5%, reaching $4,133 per ounce during the early trading hours. This follows a day after bullion prices reached their lowest point since August 5, influenced by a stronger dollar and elevated US Treasury yields impacting the market. US gold futures with December expiry increased by 0.4% to $4,158. Today’s decline in the dollar has increased demand for gold priced in American greenbacks, making it more affordable for purchasers using alternative currencies.
Fed policymakers exhibited a divergence of opinion last month regarding the justification for increasing interest rates. Some members perceived a hike as essential to mitigate the effects of energy and other price shocks, while a more hawkish faction regarded it as a necessary measure to protect against the potential onset of demand-driven inflation, as indicated by the minutes. Traders currently assign an 18% probability to a rate hike occurring later this month, while they are factoring in an 80% likelihood of an increase in December, as indicated by CME’s FedWatch tool.
Increased interest rates diminish the attractiveness of gold, which does not generate yield. Elevated yields are exerting pressure on bullion investment demand, as institutional investors are expected to favour yield-bearing bonds for liquidity allocation instead of non-yielding assets, according to Jateen Trivedi. He observed that persistent dollar strength and elevated yields may exert pressure on prices, with the range anticipated to be between Rs 1,48,000 and Rs 1,50,000 moving forward.
