Gold and Silver Prices Likely to Decline Amid US Election and Economic Data

Gold and silver markets are expected to face further downward pressure in the week ahead as bearish sentiment remains strong. Investors are closely monitoring the results of the US midterm elections, geopolitical developments, and important economic releases for signals on the future direction of precious metals.

The coming days will see the release of manufacturing and services Purchasing Managers' Index (PMI) data from key global economies, inflation figures from the eurozone, and critical US employment statistics including unemployment rates and nonfarm payroll numbers. These data points are likely to influence investor confidence and trading strategies in the metals space.

Pranav Mer, Senior Vice President of Commodity and Currency Research at JM Financial Services Ltd, emphasized that the US midterm election results on November 3 will be a primary focus. He added that the subsequent actions of President Donald Trump could have significant market implications. According to Mer, any escalation in tensions involving the US, Israel, and Iran could sharply increase crude oil prices. Such a scenario might lead to extended selling pressure and liquidation in risk assets like equities and commodities, including precious metals.

On the domestic front, gold futures for December delivery on the Multi Commodity Exchange (MCX) dropped by Rs 3,539, or 2.5 percent, over the past week, closing at Rs 1.38 lakh per 10 grams. Silver futures also fell significantly, declining Rs 16,587 or 8.5 percent to Rs 1.79 lakh per kilogram.

Jateen Trivedi, Vice President and Research Analyst for Commodity and Currency at LKP Securities, noted that gold experienced a sharp correction last week, ending near Rs 1.38 lakh per 10 grams on the MCX. Despite some volatility and a brief recovery during early sessions, selling pressure intensified toward the end of the week. He pointed out that gold has suffered cumulative selling of over 6 percent in the past three weeks, highlighting persistent weakness in investor sentiment and an absence of strong buying interest at higher price levels.

The decline in precious metals was not limited to Indian markets. Globally, Comex gold futures for December delivery fell by USD 109, roughly 3 percent, ending the week at USD 3,898.9 per ounce. Silver futures experienced an even steeper drop, losing USD 4.67 or nearly 9 percent to close at USD 49.27 per ounce.

Mer observed that on Friday, the sell-off in gold futures extended while silver's decline accelerated, driven in part by a drop in industrial metals and a dip in precious metals. Both gold and silver finished the week with substantial losses, reaching lows of USD 3,870 and USD 48.7 per ounce respectively, representing falls of 3 percent and 9 percent. He attributed some of the bullion liquidation on Friday to margin call-related selling following sharp declines in global and US information technology stocks.

Meanwhile, crude oil prices have remained firm, with Brent crude trading above USD 114 per barrel and West Texas Intermediate (WTI) close to USD 105. Mer pointed out that over the past six to eight months, gold and oil prices have shown a strong negative correlation, indicating that movements in one often influence the other inversely.

Trivedi suggested that ongoing uncertainty surrounding the US elections and heightened tensions between Washington and Tehran might intermittently boost demand for precious metals as safe havens. However, he stressed that the overall trend will largely depend on broader macroeconomic developments and data.

Precious metals markets remain sensitive to geopolitical risks and economic indicators, with investors seeking clarity from upcoming US election outcomes and economic reports. How these factors unfold will be crucial in determining whether gold and silver prices can stabilize or face further declines in the near term.