Gold rates drop, but dollar's weakness, US Fed rate cut hopes cap losses; experts highlight key levels for bullion

The rates of gold and silver declined in early trade on the MCX on Monday morning (December 8) amid profit booking at higher levels, driven by tepid spot market demand. However, a weaker US dollar and expectations of a rate cut by the US Federal Reserve this week capped the losses for the yellow metal. MCX gold February contracts were 0.04% down at ₹1,30,409 per 10 grams around 9:10 am, while MCX silver March contracts were down by 1% at ₹1,81,600 per kg at that time.

In the previous session, the MCX gold February futures contract rose 0.30% to settle at ₹1,30,462 per 10 grams, while the MCX silver March futures contract jumped nearly 3% to end at ₹1,83,408 per kilogram after hitting an all-time high of ₹1,85,234 during the session.

Gold and silver prices are witnessing high volatility ahead of the meeting of the US Federal Open Market Committee (FOMC). The central bank will announce its policy decision on December 10 amid mixed macro data.

Personal Consumption Expenditures (PCE) price index, the Federal Reserve's favourite inflation gauge, increased 0.3% in September after rising 0.3% in August. Year-on-year, the PCE Price Index increased 2.8% after rising 2.7% in August.

CME's FedWatch tool shows traders see an 88.4% chance of a 25-basis-point rate cut on December 10.

Meanwhile, expectations of a rate cut weighed on the US dollar. The US dollar index traded near its six-week low level of 98.76, which it recently hit on December 4, making greenback-priced gold cheaper in overseas currencies.

"Gold and silver are showing very high price volatility ahead of the FOMC monetary policy meetings. The US economic data released last week was mixed, the dollar index slipped to one-month lows, and a high probability of the Fed rate cuts supported prices," Manoj Kumar Jain of Prithvifinmart Commodity Research, noted.

"Physical delivery shortages and gains in base metals send silver prices to a record high. Weakness in the rupee supported metal prices in the domestic markets. However, gold prices slipped from their high amid a rebound in the US bond yields and a drop in the US unemployment claims," said Jain.

Experts unveil trading strategy

Gold and silver prices are expected to remain volatile in the lead-up to the US Federal Reserve's policy decision. However, experts say any dips in prices are opportunities to buy.

"We suggest buying gold on dips around ₹1,29,800 and ₹1,29,000 with a stop loss below ₹1,27,700 for the targets of ₹1,31,200 and ₹1,32,000, and buying silver on dips around ₹1,81,500 and ₹1,79,500 range with a stop loss below ₹1,76,600 for the targets of ₹1,85,500 and ₹1,88,000," said Jain.

According to Jain, gold has support at $4,200 and $4,164, while resistance is at $4,250 and $4,288 per troy ounce, and silver has support at $57.70 and $56.80, while resistance is at $60 and $61.40 per troy ounce in today’s session.

On the MCX, gold has support at ₹1,29,740 and ₹1,29,000 and resistance at ₹1,31,200 and ₹1,32,000, while silver has support at ₹1,81,800 and ₹1,80,000 and resistance is at ₹1,85,500 and ₹1,88,000, said Jain.

Rahul Kalantri, VP of commodities at Mehta Equities, said gold has support at $4,165 and $4,135, while resistance is at $4,250 and $4,275. Silver has support at $57.60 and $56.95, while resistance is at $58.75 and $59.15.

In INR, Kalantri said gold has support at ₹1,29,550 and ₹1,28,850, while resistance is at ₹1,31,250 and ₹1,31,800. Silver has support at ₹1,81,750 and ₹1,80,200, while resistance is at ₹1,84,710 and ₹1,85,850.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.