Gold and Silver Prices Decline Amid US Rate Hike Expectations

Gold and silver prices opened lower on Tuesday, November 3, reflecting investor concerns over potential tightening of monetary policy by the US Federal Reserve. After a modest recovery on Monday, the precious metals market faced downward pressure as new data suggested a 73 percent chance of an interest rate increase in December.

In the international markets, gold futures on the Comex exchange were trading close to $3,960 per ounce, while silver futures hovered near $50 per ounce. In India’s domestic market, gold futures on the Multi Commodity Exchange (MCX) were quoted at approximately ₹1,39,150 per 10 grams, with silver futures around ₹1,80,250 per kilogram at the time of reporting.

Looking specifically at gold, the benchmark December contract on the MCX opened ₹766 lower at ₹1,39,420 per 10 grams compared to the previous close of ₹1,40,186. By the time of writing, the price had declined further by ₹1,018, trading at ₹1,39,168. This move comes after gold futures reached a yearly high of ₹1,80,779 per 10 grams earlier this year.

Silver futures followed a similar trend, opening ₹892 lower at ₹1,82,887 per kilogram on the MCX, down from the prior close of ₹1,83,779. The decline accelerated during the session, with prices dropping ₹3,524 to ₹1,80,255 per kilogram. Earlier in the year, silver futures had reached a peak of ₹4,20,048 per kilogram.

Globally, precious metals also traded lower. On Comex, gold opened at $3,960.50 per ounce, slipping from the previous close of $3,969.60. At the time of writing, it had dropped $16.10 to $3,953.50 per ounce. Gold’s highest price this year was $5,586.20 per ounce. Silver futures opened at $50.74 per ounce, down slightly from $50.88 previously, and had declined by $0.80 to $50.08 per ounce at the latest check. Silver had earlier hit a yearly high of $121.79 per ounce.

Market analysts are watching key support and resistance levels for both metals. Ajay Kedia, director of Kedia Advisory, noted that gold’s immediate support lies at ₹1,38,640, with a further level at ₹1,37,090. Resistance is expected near ₹1,41,130, and if prices hold above this, the upward momentum could extend to ₹1,42,070. Conversely, a drop below support may increase selling pressure.

For silver, support levels are identified at ₹1,81,100 and ₹1,78,420, though current prices are already under the first support point. Resistance is projected around ₹1,85,570, with a potential recovery towards ₹1,87,360 if prices sustain above that threshold. Should prices weaken further, lower support levels will come under scrutiny.

The decline in precious metal prices is primarily linked to the rising yields on US government bonds and anticipated Federal Reserve rate hikes. Vikram Subburaj, CEO of Giottus.com, explained that increasing US Treasury yields and expectations of tighter monetary policy continue to pressure gold and silver.

During Asian trading hours, the yield on the 10-year US Treasury note rose by 2.1 basis points to 4.913 percent. Additionally, the US dollar index edged up to 101.81. Both factors have dampened fresh buying interest in precious metals.

While a steep drop in crude oil prices on Monday helped ease inflation concerns and provided some relief to bullion prices, the strong probability of a December rate increase by the Federal Reserve keeps downward pressure on gold and silver. Lower energy costs have offered some support to the metals, but the appeal of higher yields on interest-bearing assets limits demand.

Looking ahead, the strengthening of US manufacturing activity in October adds to the anticipation around upcoming employment data. These figures will be crucial in determining how much further the Federal Reserve might tighten its policy.

To summarize, gold and silver markets are navigating a complex environment shaped by monetary policy expectations, bond yields, currency movements, and inflation dynamics. Investors and traders will closely monitor economic indicators and Federal Reserve signals as they assess the outlook for precious metals in the near term.

Note: MCX gold futures prices are quoted in Indian rupees per 10 grams, while MCX silver futures are quoted per kilogram. Comex gold and silver futures prices are expressed in US dollars per ounce. All price data is accurate as of the time of writing.