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Gold and silver prices fall sharply on MCX as hotter US inflation, rising crude oil prices and the upcoming Fed policy meeting weigh on bullion.
Gold and silver prices fall sharply on MCX ahead of the US Fed policy meeting amid rising inflation and crude oil prices.
Gold Price Today: Gold and silver prices came under sharp selling pressure on Monday, September 14, as weak global cues, rising crude oil prices and growing uncertainty ahead of key central bank meetings weighed on bullion.
MCX gold October futures fell 1.19 per cent to Rs 1,50,973 per 10 grams, while MCX silver December contracts declined 1.70 per cent to Rs 2,31,000 per kg around 5:15 pm. The domestic commodity market had remained closed during the first half of the session due to Ganesh Chaturthi.
The weakness was not limited to Indian markets. International gold prices also declined as investors assessed the outlook for US interest rates following hotter-than-expected inflation data.
Why are gold and silver prices falling?
A key trigger for the sell-off is the US inflation picture.
US gold futures for December delivery fell more than 2 per cent over two consecutive sessions, touching $4,317.95 per troy ounce, after US consumer price inflation came in above expectations.
US CPI rose 3.4 per cent year-on-year in August and increased 0.3 per cent month-on-month. The numbers have raised concerns that the US Federal Reserve could maintain a tighter monetary stance to contain inflation.
The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, also remains well above its 2 per cent long-term target. PCE inflation increased 3.7 per cent year-on-year in July and has remained above the Fed’s target for 65 consecutive months.
For bullion investors, higher interest rates can make gold less attractive because the precious metal does not pay interest. Higher US rates can also support the dollar and bond yields, creating additional pressure on gold and silver.
Crude oil adds another worry
Rising crude oil prices have added to concerns about inflation.
Brent crude jumped nearly 4 per cent to trade above $108 a barrel after fresh geopolitical developments, including Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf.
Higher oil prices can push up inflation because crude is an important input for transportation, manufacturing and several other parts of the economy. If inflation stays high, investors may expect central banks to be less aggressive in cutting interest rates.
This combination of crude price volatility, the dollar and interest-rate expectations is likely to keep precious metals volatile.
Fed, BOJ meetings in focus
Commodity traders will now closely track the US Federal Reserve’s FOMC meeting and the Bank of Japan’s monetary policy meeting later this week.
According to Manoj Kumar Jain, Director and Head of Commodity Research at Prithvi Finmart Pvt Ltd, movements in crude oil, the dollar index and the upcoming Fed and BOJ meetings could determine the direction of gold and silver.
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