Gold prices opened on the Multi Commodity Exchange (MCX) on Tuesday at Rs 61,904 per 10 grams and hit an intraday low of Rs 61,904. In the international market, prices hovered around $2,030.53 per troy ounce.
Meanwhile, silver opened at Rs 70,980 per kg and hit an intraday low of Rs 70,900 on the MCX. The price hovered around $23.30 per troy ounce in the international market.
Manav Modi, Analyst, Commodity and Currency, MOFSL, said, “Gold and silver inched lower in the previous session as investors rolled back expectations of a US interest rate cut at the end of March and as China kept their interest rate unchanged against market expectations weighing on industrial metal including silver.”
The rollover effect of China’s unchanged rates and diminished hopes for a US rate cut, as it is being seen as a reflection of the tentative and cautious approach central banks around the world are embracing.
Gold prices dipped 0.1%, while silver also fell slightly by 0.2%. Platinum and palladium experienced similar losses, painting a gloomy picture for the metal yard. This is a significant slump from previous weeks when expectations around monetary easing fuelled an uptick in the market.
Modi said, “Gold fell about 1% last week, its biggest weekly decline in six, after the U.S. Federal Reserve said it needs to see more inflation data before any rate cut judgment could be made and that the baseline for cuts to start was in the third quarter.”
Fed officials’ comments and economic data points from the US both signalling that the rate cut, which the market had discounted for in March’24, is a bit early, and it will take some more time before loosening the monetary policy.
Price dynamics of precious metals are heavily influenced by changes in interest rates due to their non-yielding nature. As such, the metals lose their appeal when rates rise or hopes of a rate cut dwindle, as seen in the recent market movements.
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Modi said, “Traders are pricing in around 40% chance that the Fed will cut interest rates in March, compared with more than 70% at the beginning of last week. Investors, this week, will keep an eye on the preliminary PMI reports from major economies, fourth-quarter advance GDP estimates and personal consumption expenditures data for more cues on interest rates.”
In conclusion, diminished hopes for a US rate cut and China’s unchanged interest rates have indeed cast a long shadow over the precious metals market. Consequently, investor sentiment has turned shakier, with precious metals sliding lower, at least for the foreseeable future.