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Gold prices in India extended losses of last week when they fell 0.3% in futures market today morning. On MCX, gold futures were down 0.3% to near six-month low of 49,237 per 10 gram. Silver futures on MCX were flat at 56820 per kg. The yellow metal had fallen sharply in the previous week, weighed by gains in dollar index and firm US bond yields. Last week’s hot US inflation data, combined with a strong labor market and retail sales numbers, prompted some analysts to predict a full percentage point hike by the Fed later this week. In domestic markets, gold slumped 3% or about 1,500 last week. 

In global markets, the yellow metal today fell as much as 0.4% to $1,668.28 an ounce. 

All eyes are on the Fed's policy decision later week. Though most analysts expect a 75 bps hike, some see the US central bank hiking by 100 basis points. High interest rates increase the opportunity cost of holding non-yielding bullion.

However,  US consumers' near-term inflation expectations fell to a one-year low in September. “While there are enough reasons for the Fed to continue with rate hikes, improving inflation has eased pressure on the central bank to act aggressively. While the Fed’s stance has kept the US dollar supported, upside remains challenged by monetary tightening stance of other central banks as well as increased possibility of intervention in the currency market," Kotak Securities said. 

The Bank of England is also meeting this week and analysts expect a 50 to 75 basis-point hike.

Despite the recent price decline, flows into gold-backed ETFs remained muted. Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.1% to 960.85 tonnes on Friday from 962.01 tonnes on Thursday.

Gold has fallen sharply in last few days and set fresh lows indicating strong bearish sentiment. But we recommend some caution due to increased volatility in the US dollar and fresh selling should be at corrective rebounds," said Kotak Securities in a note. 

Gold Technical Outlook

“On Friday, gold closed below the support level at $1680. This was the first instance since gold broke above that price point in April 2020. Silver also followed suit and eased after the U.S. University of Michigan inflation expectations showed a reading of 4.6% against an expected reading of 4.8%. However, both the precious metals recovered from their lows," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

“Gold and silver prices are likely to remain volatile ahead of the Fed policy meeting and fear of global recession, as the Fed is widely expected to hike rates by 75 basis points with traders also pricing in the possibility of a 100 basis point hike. Gold has support at $1662-1650, while resistance is at $1686-1798. Silver has support at $19.18-18.95, while resistance is at $19.62-19.85. In rupee terms gold has support at 49,020-48810, while resistance is at 49,480, 49,640. Silver has support at Rs55,750-55,240, while resistance is at 57,180–57,510," he added. 

 

 

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