Gold and silver prices came under renewed selling pressure on Tuesday, 28 July, as investors awaited the outcome of the US Federal Reserve’s policy meeting, while a stronger US dollar weighed on precious metals by making them more expensive for holders of other currencies.
Comex gold futures fell $66 per troy ounce to an intraday low of $4,011, while silver futures also tumbled nearly $1.85 per troy ounce to $56.86.
The US Dollar Index traded around 101.5 against a basket of major currencies as markets priced in more than a one-third probability of a Federal Reserve rate hike later this year.
Since the outbreak of the US-Iran conflict in late February, expectations of higher interest rates have strengthened, keeping precious metals out of investors’ favour as they do not offer any yield.
Interest-rate swaps currently imply about a one-in-three chance of a quarter-percentage-point rate hike, an unusually high degree of uncertainty this close to a Fed policy decision by the standards of recent years.
Those expectations have been shaped despite repeated calls from US President Donald Trump for lower interest rates. During June, US inflation came in lower than expected, aided by a decline in energy prices.
At its June policy meeting, the Federal Reserve kept the federal funds rate unchanged at 3.50%-3.75% for a fourth consecutive meeting. However, the central bank signalled that further policy tightening remains a possibility.
Geopolitical risks ease as US-Iran talks remain in focus
In the Middle East, geopolitical tensions eased after the United States paused its daily strikes on Iran. President Donald Trump said there was a “good chance” of reaching a deal with Tehran and reportedly decided to suspend the strikes to give diplomatic negotiations another opportunity.
While precious metals are traditionally viewed as safe-haven assets during periods of geopolitical uncertainty, the sharp rise in crude oil prices has fuelled inflation concerns and increased the appeal of higher-yielding assets.
“Easing Middle East tensions after renewed US-Iran diplomatic engagement weighed on crude oil prices, tempering inflation concerns, although Trump warned military action could resume if talks fail,” said domestic brokerage firm Kotak Securities.
Gold’s near-term direction now hinges on the Fed’s policy guidance and geopolitical developments, with a hawkish stance posing downside risks, while any renewed conflict could quickly revive safe-haven demand, the brokerage added.
MCX gold, silver remain under pressure
Tracking weakness in international markets, the near-month MCX gold futures contract fell ₹1,911 per 10 grams to an intraday low of ₹1,41,152, extending its weakness to a second straight session.
The MCX silver futures contract dropped ₹6,324 per kg to an intraday low of ₹2,14,849. A break below the ₹2.10 lakh mark could push the white metal to its lowest level since late March.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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