The continuous decline in gold and silver prices is showing no sign of stopping. On Wednesday, July 1, the prices of precious metals crashed in the early trading on Multi Commodity Exchange (MCX). Gold for August delivery has fallen by 0.86 percent to ₹ 1,41,300 per 10 grams. At the same time, the shine of silver has also faded. Around 9:10 am, silver for September futures was trading at ₹2,23,850 per kg, down 2.06 per cent. The strengthening US dollar, rising treasury yields as well as strong fears of the US Federal Reserve raising interest rates are mainly responsible for this decline.
The US Federal Reserve may increase interest rates three times this year. Due to this apprehension, the dollar is continuously strengthening, which is putting direct pressure on the bullion market. Registering a rise for the second consecutive month, the dollar index has jumped by more than 2 percent in June and reached near the level of 101.35. Due to the expensive dollar, buying gold becomes an expensive deal for buyers of other currencies, which reduces the overall demand. Market experts expect that the Federal Reserve may increase rates in September, October as well as December. Now all eyes are on the next meeting of the Federal Open Market Committee (FOMC) to be held on July 28-29. Currently, the market is waiting for the statements of Fed Chairman Kevin Wersh for new guidance.
Last month was quite disappointing for precious metals investors. If we look at the MCX data, a huge decline of about 10 percent (₹ 15,100) was recorded in the domestic spot gold prices in June, due to which the price came down to ₹ 1,40,864 per 10 grams. The condition of silver was even worse. By June 30, silver fell by about 15 percent (₹38,250) and closed at ₹2,25,125 per kg. Internationally too, US gold has seen its biggest quarterly decline since 2013.
Amid concerns about inflation, the US-Iran dispute has also affected the market. After the agreement between the two countries on talks to resolve the dispute, there was a softening in the prices of crude oil, the effect of which was also visible on bullion. However, clouds of uncertainty are still looming on the geopolitical front. According to a recent report by Reuters, Iranian representatives will not meet their American counterparts after the start of hostilities. Apart from this, the market is also keeping a close eye on the non-farm payroll data to be released on Thursday along with the ADP employment data for June, which will decide the future direction of interest rates.
According to Manoj Kumar Jain, expert of Prithvi Finmart Commodity Research, gold and silver investors should keep an eye on certain levels.
