Gold rates fall on profit booking amid waning US Fed rate cut expectations, easing geopolitical tensions

Gold rates declined by about half a per cent in early deals on the MCX on Friday, January 16, morning, amid fading expectations of US Fed rate cuts and easing geopolitical tensions. MCX gold February futures were 0.48% down at ₹1,42,434 per 10 grams around 9:05 am. MCX silver March futures were more than 2% down at ₹2,85,676 per kg at that time.

Gold prices dropped in global markets, too. U.S. gold futures for February delivery dropped by nearly half a per cent to $4,594.81.

The immediate trigger behind a profit booking in gold prices appears to be a stronger-than-expected US economic data, which pushed the dollar higher.

The dollar index is up about 0.20% for the week, looking set to extend its weekly winning streak to its third consecutive week. For the month so far, the dollar index is up about a per cent.

The dollar's rise tends to weigh on gold prices as the greenback-backed yellow metal becomes expensive in other currencies, potentially weakening demand for the precious metal.

Meanwhile, expectations of US Fed rate cuts weakened after an unexpected fall in US jobless claims.

As news agency Reuters reported, quoting the US Labor Department data, "weekly initial jobless claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 1,98,000. This was below expectations of 2,15,000 claims, as per economists polled by Reuters."

While investors still expect at least two US Fed rate cuts this year, the latest US job market trends and inflation data hint that the central bank may not cut rates in the next few months.

Meanwhile, geopolitical risks eased after US President Donald Trump indicated he may delay any military action against Iran.

"Weaker-than-expected U.S. weekly jobless claims strengthened the dollar, while President Donald Trump’s softer stance on Iran reduced safe-haven demand for precious metals. Meanwhile, recent data has kept expectations of Federal Reserve rate cuts on hold for the first half of the year, pushing the dollar index to multi-week highs and creating near-term headwinds for gold," Rahul Kalantri, VP of commodities at Mehta Equities, observed.

Gold and silver: Key levels to watch

According to Kalantri, gold has support at $4,520 and $4,455 while resistance is at $4,640 and $4,690. Silver has support at $86.10 and $84.75, while resistance is at $92.15 and $94.40.

In INR, Kalantri said gold has support at ₹1,42,350 and ₹1,40,310 while resistance is at ₹1,44,350 and ₹1,45,670. Silver has support at ₹2,88,810 and ₹2,84,170, while resistance is at ₹2,94,810 and ₹2,96,470.

According to Jigar Trivedi, Senior Research Analyst at Reliance Securities, MCX gold February futures may drop to ₹1,42,300 per 10 grams as the undertone is mildly weak in dollar terms too.

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