Gold, Silver face tough week on West Asia risks
Gold and silver are expected to remain on the back foot in the next week as traders assess the impact of the escalating West Asia conflict, firm crude oil prices and key global macroeconomic data releases, analysts said.
Investors will also closely watch a busy calendar of key numbers, including US weekly jobless claims and flash PMI, along with monetary policy decisions and key economic indicators from Europe and China, for fresh cues on global interest rates. The US military on Sunday carried out fresh airstrikes against Iran following attacks on American-linked installations in Jordan, further escalating tensions in an already volatile West Asia, they added.
“Momentum in gold remains corrective as investors look ahead to the Federal Reserve’s meeting towards month-end. However, focus will remain on developments between the US and Iran,” said Pranav Mer, Senior Vice President, EBG — Commodity & Currency Research, JM Financial Services Ltd. On the Multi Commodity Exchange (MCX), gold futures for August delivery declined Rs 2,572, or nearly 2 per cent, closing at Rs 1.4 lakh per 10 grams. Silver for the September contract slumped Rs 6,261, or 2.8 per cent, to Rs 2.16 lakh per kilogram on the MCX.
“Gold extended its corrective phase last week as a stronger US dollar, firm crude oil prices, and expectations of prolonged higher interest rates continued to weigh on bullion,” said Jateen Trivedi, VP Research Analyst — Commodity and Currency, LKP Securities.
He said every rebound in gold attracted fresh selling pressure, suggesting traders preferred booking gains rather than building fresh long positions. The rupee’s mild correction offered little support as the stronger dollar continued to dominate sentiment. In global markets, Comex gold futures slipped $95, or 2.3 per cent, to close at $4,018.8 per ounce during the past week, while silver plunged nearly $4, or 6.4% to $56.32 per ounce in New York.
Mer said gold and silver recovered on Friday but still ended the week in the red territory as crude oil prices surged more than 14 per cent on fears of supply disruptions, while rising Treasury yields further dented bullion’s appeal.
Praveen Singh, Head of Commodities at Mirae Asset ShareKhan, said hawkish comments from Federal Reserve Chair Kevin Warsh’s have offset the impact of softer US inflation data, reinforcing expectations of tighter monetary policy.
Singh described that any fresh friction between the US and China could revive the demand for bullion, while investors will also monitor the Eurozone, UK PMI data, and developments in Beijing for the next course of direction in precious metals.
