Precious metals, including gold and silver, are experiencing a recovery from recent lows. This uptick is largely attributed to a reduction in market expectations for a US Federal Reserve rate hike in October. Despite this positive sentiment, the upward movement is being constrained by elevated US Treasury yields and a robust US dollar.
In the domestic Indian market, MCX gold was trading at ₹1,49,735 per 10 grams, marking a 0.42% increase. MCX silver, meanwhile, stood at ₹2,21,211 per kilogram, experiencing a marginal dip of 0.01%. Globally, gold futures climbed 1.04% to $4,200.15 per ounce, and silver futures rose 1.56% to $60.345 per ounce.
Factors Influencing Precious Metal Prices
According to Sugandha Sachdeva, VP Research at Religare Securities, the primary driver behind the current precious metals recovery is the easing of expectations for an immediate Fed rate hike. This shift in market sentiment follows softer personal consumption expenditures (PCE) inflation data and a weaker US employment report.
"Gold and silver prices are seen recovering from lower levels as expectations of a rate hike at the Fed’s October meeting have eased," Sachdeva noted. She added that international gold maintains strong support between $4,050 and $4,100 per ounce, with immediate resistance around $4,240 per ounce.
Headwinds and External Factors
While the immediate outlook shows recovery, Sachdeva highlighted that high US Treasury yields and a strong Dollar Index could limit further gains for gold and silver. A sustained decline in yields and a weaker dollar would significantly improve the prospects for both metals.
Beyond monetary policy, crude oil prices and ongoing geopolitical developments are also critical factors. A sustained drop in crude prices could alleviate energy-related inflation, potentially reducing the need for further monetary tightening and supporting precious metals. Conversely, renewed geopolitical tensions or a sharp rise in oil prices could reignite inflation concerns and hinder the recovery.
Key Support and Resistance Levels for Traders
Investors and traders are advised to monitor crucial support and resistance levels closely:
- International Gold: Support is found between $4,050–$4,100 per ounce, with immediate resistance at $4,240 per ounce.
- Domestic MCX Gold: Support is around ₹1,48,000 per 10 grams. Resistance levels are at ₹1,51,500, followed by ₹1,54,600.
- Domestic MCX Silver: Support is approximately ₹2,17,000 per kg. Resistance levels are at ₹2,28,800 and then ₹2,36,000.
- International Silver: Closing support is near $58.50 per ounce, with immediate resistance at $62.50 per ounce.
Sachdeva's outlook remains cautiously positive, contingent on these key support levels holding. A decisive close below $4,050 for international gold or $58.50 for international silver could weaken the technical structure and potentially lead to further declines.
Moving forward, market participants will closely observe the trajectory of the US dollar, Treasury yields, and crude oil prices for clear indicators on whether gold and silver can sustain and extend their current recovery.