Gold, silver prices fall as bets on December Fed rate hike weigh on bullion

Gold and silver futures traded lower on Tuesday, November 3, as expectations of further monetary tightening by the US Federal Reserve weighed on demand for precious metals, offsetting some of the recovery recorded in the previous session.

Both metals had rebounded on Monday, the first trading day of the week. However, estimates available on Tuesday morning indicated a 73 per cent probability of the Federal Reserve raising interest rates in December, keeping investors cautious about fresh positions in bullion.

In the international market, Comex gold futures were trading near $3,960 per ounce, while silver was around $50 per ounce. On the domestic Multi Commodity Exchange (MCX), gold futures were trading near ₹1,39,150 per 10 grams and silver futures near ₹1,80,250 per kg at the time of writing.

MCX gold and silver contracts open lower

The benchmark December gold contract on the MCX opened at ₹1,39,420 per 10 grams, down ₹766 from its previous close of ₹1,40,186. At the time of writing, it was trading at ₹1,39,168, registering a decline of ₹1,018.

Gold futures had touched a high of ₹1,80,779 per 10 grams earlier this year.

Silver futures also began the session on a weaker note. The benchmark December contract opened at ₹1,82,887 per kg, down ₹892 from its previous close of ₹1,83,779. It was later trading at ₹1,80,255, a fall of ₹3,524.

Silver futures had earlier reached a high of ₹4,20,048 per kg this year.

International bullion prices remain under pressure

Gold and silver also traded lower on international exchanges. On Comex, gold opened at $3,960.50 per ounce, compared with its previous closing price of $3,969.60. At the time of writing, it was down $16.10 at $3,953.50 per ounce.

Gold prices had reached a high of $5,586.20 per ounce earlier this year.

Comex silver futures opened at $50.74 per ounce, against the previous close of $50.88. The contract was subsequently trading $0.80 lower at $50.08 per ounce. Silver had touched a high of $121.79 per ounce earlier this year.

Key support and resistance levels for gold and silver

According to Ajay Kedia, director of Kedia Advisory, gold has immediate support at ₹1,38,640, followed by ₹1,37,090. Resistance is placed at ₹1,41,130. If prices sustain above this level, the recovery could extend towards ₹1,42,070. A break below immediate support, however, could increase selling pressure.

For silver, immediate support is seen at ₹1,81,100, followed by ₹1,78,420. The contract's quoted price of ₹1,80,255 was already below the first support level.

Resistance for silver is placed at ₹1,85,570. A sustained move above this mark could take prices towards ₹1,87,360, while further weakness could bring the next support level into focus.

Why are gold and silver prices falling?

Vikram Subburaj, chief executive officer of Giottus.com, said rising US bond yields and expectations of another Federal Reserve interest-rate increase were putting pressure on gold and silver.

In Asian trade, the yield on the 10-year US Treasury rose 2.1 basis points to 4.913 per cent, while the dollar index edged higher to 101.81. These developments made it difficult for fresh buying momentum in precious metals to sustain, he said.

A sharp decline in crude oil prices on Monday had eased inflation concerns and provided some relief to bullion. However, the prospect of a December rate increase continued to weigh on investor sentiment. Higher interest rates make interest-bearing assets more attractive compared with gold and silver, which do not offer regular returns.

Fresh concerns over rising oil prices and inflation also added to market uncertainty on Tuesday. International market reports indicated that renewed geopolitical tensions in the Middle East had pushed crude prices higher, reviving expectations that interest rates could remain elevated for longer.

With US manufacturing activity strengthening in October, upcoming employment data will be important in determining whether expectations of further rate increases weaken, Subburaj said.

Investors are therefore likely to monitor US economic indicators, movements in the dollar and Treasury yields, and signals from the Federal Reserve for further direction in precious metals.