Gold lost its shine in the domestic bullion market on Tuesday, with prices in India falling steadily on the back of heavy selling pressure across global markets. Spot gold slipped below $4,100 an ounce, while spot silver dropped below $62 an ounce. Both precious metals shed between 1% and 2%.
The biggest trigger behind the slide is the hawkish stance of the US Federal Reserve. Expectations of interest rates staying higher have outweighed the support that bullion was drawing from the interim US-Iran peace agreement.
Fed Decision Tightens the Squeeze
At its latest policy meeting, Fed officials left interest rates unchanged but signalled growing support for future rate hikes. New Fed Chair Kevin Warsh reaffirmed his commitment to restoring price stability. At the same time, progress in talks between Washington and Tehran has encouraged a rise in traffic through the Strait of Hormuz, easing pressure on global energy supplies and lowering the risk of inflation.
Selling pressure on gold intensified further as US technology stocks fell sharply. To offset losses elsewhere in their portfolios, investors trimmed their bullion holdings, adding to the downward pull on the metal.
How MCX Gold and Silver Fared
On the MCX, gold traded at Rs 1,44,667 per 10 grams, registering a steep fall of Rs 1,862, or 1.3%. The metal hovered close to its intraday low of Rs 1,44,114 per 10 grams.
Silver, which had tumbled by nearly Rs 3,500 in early trade, clawed back some of its losses. At the time of writing, MCX silver stood at Rs 2,24,741 per kilogram, down 0.5%. It had touched an intraday low of Rs 2,21,658 at the opening bell.
Spot Market Hits a Seven-Month Low
Spot gold dropped by about 1.12% to slip below $4,070 an ounce, breaking the $4,100 mark and falling to its lowest level in seven months. Spot silver, meanwhile, fell around 1% on fears of tighter Fed policy. Unlike gold, silver dropped to a six-month low.
A stronger dollar index also kept pressure on bullion prices. Markets are factoring in the possibility of future rate hikes, while uncertainty around the US-Iran talks has kept sentiment cautious.
The Role of Crude Oil and Hormuz
US WTI crude oil also fell nearly 1%. The decline was driven by the advancing US-Iran peace agreement, growing transit through the Strait of Hormuz, and the likelihood of complete peace in the Middle East conflict. The International Maritime Organization said it had received security assurances that could allow hundreds of vessels to leave the Persian Gulf via Hormuz, as efforts continue to evacuate thousands of seafarers. According to the IEA, UAE oil exports rebounded in early June to nearly 85% of pre-conflict levels, supported by pipelines, storage facilities and alternative shipping routes.
What Lies Ahead
Markets are now focused on next week's US Non-Farm Payrolls and unemployment data, which could set a fresh direction for both gold and the dollar. According to Jateen Trivedi, VP Research Analyst for Commodity and Currency at LKP Securities, gold is likely to trade in the Rs 1,44,500 to Rs 1,48,500 range in the near term.
