Gold price declines on profit booking as rate cut bets ease; silver trades flat

Gold prices declined on Tuesday as investors opted to take profits following a recent surge, influenced by diminishing expectations of Federal Reserve interest rate cuts. This came amidst anticipation for crucial U.S. inflation figures scheduled for later this week.

By 1119 GMT, spot gold dipped by 0.3% to $2,344.20 per ounce, following a 0.7% uptick on Monday.

The precious metal slipped below its 21-day moving average, currently at $2,348, yet remained poised for its fourth consecutive month of growth, boasting a 2.5 per cent increase in May. Notably, the spot price reached an all-time high of $2,449.89 on May 20.

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“Gold is trading slightly lower on profit-booking after yesterday’s sharp up-move, as some caution is seen among traders ahead of the inflation data from Germany/ Eurozone and U.S., which could influence the policy decision of the European Central Bank and U.S. Fed, respectively. Also absence from fresh triggers from the market have kept the bullion’s in a range,” said Pranav Mer, VP - Research (Commodity & Currency) BlinkX and JM Financial.

What's weighing on gold prices?

Non-yielding precious metals, often considered a safeguard against inflation, experienced a decline following the release of Federal Reserve meeting minutes last week. The minutes indicated that, at present, the strategy entails keeping the benchmark rate unchanged, but also highlighted deliberations on potential future increases.

Market participants are factoring in approximately a 63 per cent probability of a rate decrease by November, and are eagerly anticipating the release of the core personal consumption expenditures price index (PCE), the Federal Reserve's favored measure of inflation, scheduled for Friday.

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Back home, gold futures trading fell by ₹166 to reach ₹71,843 per 10 grams, as traders trimmed their holdings. On the MCX, contracts for June delivery of gold were down by ₹166, trading at ₹71,843 per 10 grams, with a business turnover of 4,742 lots.

“Gold prices were weak in the first half of the session in both Comex and MCX markets. Following a strong rally yesterday, prices paused within a small range of $2,340-$2,353 in Comex and ₹71,770- ₹72,030 in MCX. The mixed market reaction came after renewed tensions in the Middle East. This week's focus is on the PCE price index release on Friday, which will provide hints about inflation. Traders are expected to remain active within a range of ₹71,500- ₹72,500 in MCX, amid the anticipated volatility,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

Silver dropped by 0.3 per cent to $31.59 following a 4.4 per cent surge on Monday. It's poised to achieve a 20 per cent increase in May, marking its most significant monthly growth in nearly four years. 

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In India, silver futures reached a new all-time high of ₹96,220 per kg on the MCX, on Tuesday during evening trading,. This surge of ₹1,612 per kg intraday over Monday's closing price of ₹94,608 was fueled by robust purchasing activity in the global market.

Meanwhile, platinum saw a decrease of 0.8 per cent to $1,045.96, yet it's set for a 12 per cent rise this May, its most substantial monthly increase since November 2020. Palladium also experienced a decline of 1.5 per cent to $973.49.