Gold and silver prices crash up to 2% on MCX- What is driving precious metals down?
MCX gold October futures were down 1.19% at ₹1,50,973 per 10 grams, while MCX silver December contracts were 1.70% down at ₹231000 per kg around 5:15 PM. The commodity market was closed in the first half of the session due to Ganesh Chaturthi. International gold…
The commodity market was closed in the first half of the session due to Ganesh Chaturthi. International gold prices were also down amid heightened concerns about a possible interest rate hike by the US Federal Reserve on Wednesday.
August PCE prints are due on 30 September. A sharp jump in oil prices was triggered by new Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf.
What Happened
According to Vandana Bharti, Head of Commodity Research at SMC Global Securities, gold has already seen a meaningful correction from its recent highs as the market has gradually begun to price in the possibility of a Fed rate hike. So, to some.
MCX gold October futures were down 1.19% at ₹1,50,973 per 10 grams, while MCX silver December contracts were 1.70% down at ₹231000 per kg around 5:15 PM.
US gold futures for December delivery have crashed more than 2% in just two consecutive sessions to hit $4,317.95 per troy ounce after the US CPI data came above expectations, reinforcing concerns that the.
According to Reuters, the CME FedWatch Tool indicates traders are pricing in about an 89% chance of a rate hike by the Fed this week, up from about 67% before last week's inflation data.
Key Details
Bharti believes Wednesday’s Fed decision will be a key trigger for the next big move. The real shock, however, would be a surprise 50-bps hike.
US CPI for August rose 3.4% year-on-year and 0.3% month-on-month.
The Fed’s favoured gauge of inflation- the US personal consumption expenditures (PCE) price index- increased by 3.7% year-on-year in July, above the Fed’s long-term 2% inflation target for 65 straight months.
Crude oil benchmark Brent crude jumped nearly 4% to trade above $108 per barrel, fuelling inflation fears.
Why It Matters
Bharti believes if the Fed keeps rates unchanged, despite expectations of a hike, the reaction could be strongly positive for gold. After the recent correction, short covering along with fresh buying could trigger a sharp rebound.
If the Fed delivers a 25-bps rate hike, gold could see another 1–2% correction, particularly if the Fed signals that rates may remain higher for longer.
In that scenario, MCX gold could move towards ₹1,56,000– ₹1,58,000, while COMEX gold could test $4,580–$4,600.
What Reports Say
Coverage of the story so far points to:
Aamir Makda, commodity and currency analyst- commodity technical research at Choice Broking, also underscored that market expectations have already priced in a probable 25-basis-point increase, which might result in a brief pullback in gold.
Continued reporting by Livemint as more details emerge
