Gold prices have dropped over 4% in a week, with futures on the Multi Commodity Exchange sliding to Rs 1,49,875 per 10 grams. A stronger US dollar and rising Treasury yields are pulling investor interest away from the metal. Investors are now tracking the Federal Reserve’s upcoming interest rate decision and geopolitical developments for further price direction.
Gold prices have seen a sharp correction this week, with December futures on the Multi Commodity Exchange (MCX) falling to Rs 1,49,875 per 10 grams. This decline of over 4% from recent peaks reflects a significant shift in how global investors are viewing gold. In international markets, spot gold has also retreated, trading near $4,176 per ounce, as the yellow metal struggles to maintain its traditional appeal as a safe investment.
The current pressure on gold comes from a combination of a strengthening US dollar and rising energy costs. The US Dollar Index has climbed to 101.15, making gold more expensive for holders of other currencies, which typically dampens demand. At the same time, Brent crude oil prices have crossed the $107 per barrel mark. While gold is often considered a hedge against inflation, high energy costs are currently fueling fears that inflation will remain sticky, prompting the US Federal Reserve to potentially keep interest rates higher for longer.
A key factor hurting gold right now is the rise in US Treasury yields. Gold does not pay interest or dividends, making it less attractive when investors can earn steady returns from government bonds. With markets currently pricing in a 68% chance of another interest rate hike by the Federal Reserve in October, the incentive to hold non-yielding assets like gold has decreased.
From a technical perspective, the domestic futures market is now monitoring specific levels. Commodity analysts are watching the support range near Rs 1,48,000 and Rs 1,46,000 per 10 grams. If the price falls below these levels, it could signal further weakness. On the upside, resistance is identified at Rs 1,52,500 and Rs 1,55,000.
Beyond economic data, investors are also paying close attention to global geopolitics. Tensions surrounding the Strait of Hormuz, involving the US and Iran, remain a wildcard. While such conflicts historically drive up gold prices due to 'safe-haven' demand, the current market dynamics are prioritizing interest rate fears over geopolitical anxiety. Any de-escalation in these diplomatic tensions could remove a layer of support for gold prices, while a hawkish stance from the Federal Reserve would likely keep the pressure on. Moving forward, the most critical monitorable for investors will be the official commentary from the Federal Reserve regarding the October rate decision.