Gold futures on the Multi Commodity Exchange dipped to ₹1,49,370 per 10 grams on Monday, pressured by a strong US dollar and rising Treasury yields. Investors are staying cautious as high bond yields make non-interest-paying assets like gold less appealing. While festive demand could provide support, the metal remains sensitive to Federal Reserve policy expectations for the end of the year.
Gold futures on the Multi Commodity Exchange saw a decline during Monday's trading session, falling by ₹1,020 to settle at ₹1,49,370 per 10 grams. This downward movement marks a continuation of the weakness seen over the past week, as investors react to strengthening macroeconomic factors from the United States that are curbing the appeal of precious metals.
The pressure on gold primarily stems from a strong US dollar, which has been trading near an 18-month high of 102.37. When the dollar strengthens, gold—which is priced in dollars—becomes more expensive for buyers using other currencies, often leading to a reduction in demand. Simultaneously, US 10-year Treasury yields have climbed to around 5.2%. For investors, this creates an opportunity cost. Gold does not pay interest or dividends; therefore, when government bonds offer higher, safer returns, investors often shift their capital away from gold and into bonds.
Market participants are also carefully watching the Federal Reserve’s future policy decisions. While recent economic data regarding US jobs has cooled immediate expectations for an interest rate hike in October, there is still a significant probability being priced in for a rate increase by December. Higher interest rates generally increase the cost of holding gold, as they raise the attractiveness of yields elsewhere. This creates a difficult environment for gold prices to sustain any significant upward momentum in the short term.
In the domestic Indian market, physical demand remains selective. Jewellers are exercising caution, keeping purchases limited due to the currently elevated price levels. However, many in the industry expect that the approaching wedding and festive season might provide some structural support, preventing prices from falling too sharply. This seasonal demand is often a key factor for the domestic market, helping to balance out the negative influence from global cues.
Interestingly, silver showed a different trend during the same period, recording a gain of 0.54% to reach ₹2.27 lakh per kilogram. This divergence suggests that while gold is struggling under currency and yield pressures, industrial and global demand factors are influencing silver differently. The metal's performance was also bolstered by strength in global futures.
Looking ahead, the movement of precious metals will likely depend on upcoming global economic indicators. Investors will be monitoring key data, including services sector performance reports and US trade figures, which will offer more clarity on the health of the US economy. These reports will be critical in shaping the Federal Reserve's stance and, consequently, the future direction of gold and silver prices. Persistent inflation, geopolitical tensions, and ongoing government borrowing in the US remain the primary risks that could continue to influence price volatility in the coming weeks.