Gold and silver prices opened lower on the Multi Commodity Exchange (MCX) for a second consecutive day on Wednesday, as investors balanced renewed geopolitical risk in the Middle East with expectations for tighter US monetary policy. The moves come ahead of key US inflation data that could influence the Federal Reserve’s next interest rate decision.
MCX gold futures were trading lower, while silver slipped to around Rs 2.39 lakh per kilogram. Market participants are now pricing in roughly a 60% probability that the Fed will raise rates at its upcoming meeting, according to CME FedWatch data cited by traders.
Middle East tensions and crude oil
Renewed hostilities in the Middle East have pushed crude oil prices higher, which typically weighs on gold because it raises the opportunity cost of holding non-yielding bullion. Higher energy costs also feed into inflation expectations, reinforcing the case for a hawkish Fed. However, geopolitical uncertainty can sometimes support gold as a safe haven; the net effect this week has been negative for the precious metal.
Fed rate hike expectations
The strong probability of a rate hike is the dominant factor dragging on gold. Higher interest rates increase the yield on competing assets such as bonds and make dollar-denominated gold more expensive for holders of other currencies. The market’s focus now turns to the US consumer price index (CPI) report due later this week, which will provide the latest snapshot of inflation and could shift rate expectations further.
Key levels to track
Technically, MCX gold futures are testing near-term support around the Rs 58,000 per 10 gram mark. A break below that level could open the door to the next support zone near Rs 57,500. On the upside, resistance is seen at Rs 58,800 and then Rs 59,200. For silver, the Rs 2.35 lakh per kg level acts as support, while Rs 2.45 lakh is a resistance point. Traders will also watch the dollar index and US bond yields for additional cues.
Key takeaways
- Gold and silver opened lower on MCX for a second day amid Middle East tensions and higher crude oil prices.
- Traders see about a 60% chance of a Fed rate hike, which is pressuring precious metals.
- US inflation data due this week could alter rate expectations and drive further price moves.
- Key support for MCX gold is near Rs 58,000; silver support is at Rs 2.35 lakh per kg.
Common questions
Why are gold prices falling despite Middle East tensions?
Geopolitical risk can support gold as a safe haven, but the dominant factor this week is the high probability of a Federal Reserve rate hike. Higher interest rates make gold less attractive compared to yield-bearing assets, outweighing the safe-haven bid.
What US data is important for gold this week?
The US consumer price index (CPI) report is the key release. It measures inflation and will help shape expectations for the Fed’s next move. A higher-than-expected reading could increase the chance of a rate hike and push gold lower, while a softer figure might ease pressure.
For the latest movements, check the live gold price on GoldRate.info.
In summary, gold and silver are under pressure from a combination of higher crude oil, renewed Middle East tensions, and a clear market expectation of a Fed rate hike. The direction of prices in the coming days will likely depend on the US inflation data and any shifts in geopolitical developments.