Gold snaps 4-day rally; falls Rs 600; silver rebounds

Gold prices declined by Rs 600 to Rs 1,66,500 per 10 grams in the national capital on Wednesday, snapping a four-session winning streak as investors booked profits following a strong rally and international prices weakened. The precious metal of 99.9 per cent purity had settled at Rs 1,67,100 per 10 grams in the previous session. Silver, however, moved in the opposite direction in the domestic market, gaining Rs 500 to Rs 2,50,500 per kilogram, inclusive of all taxes. It had closed at Rs 2.5 lakh per kg on Tuesday, according to the All India Sarafa Association.

Profit-booking weighs

Akshat Siddhant, Lead Quant Analyst at investment platform Mudrex, attributed the fall in domestic gold prices to profit-booking after a strong multi-week rally. A stronger US dollar ahead of the Personal Consumption Expenditures (PCE) inflation report also put pressure on precious metals, he said. Gold has repeatedly touched fresh multi-month highs this year, supported by factors including the US Treasury's expanding debt-buyback programme, lower bond yields and continued purchases by China's central bank, Siddhant added.

In overseas markets, spot gold dropped USD 39.66, or nearly 1 per cent, to USD 4,619.21 per ounce. Silver was marginally lower at USD 68.50 an ounce.

Praveen Singh, Head of Commodities at Mirae Asset ShareKhan, said spot gold was consolidating after five consecutive sessions of gains. The metal was trading around USD 4,621 per ounce, down nearly 1 per cent.

Crude oil prices have also extended their decline as supply concerns eased amid efforts by Iran and Oman towards a temporary opening of the Strait of Hormuz, Singh said.

Meanwhile, holdings in gold-backed exchange-traded funds have increased sharply in recent weeks, indicating continued investor interest in the precious metal.

Fed signals in focus

Investors will now closely track US inflation data and signals from the Federal Reserve for cues on the direction of bullion prices.

Saumil Gandhi, Senior Analyst - Commodities at HDFC Securities, said indications about the Federal Reserve's broader approach towards inflation and monetary policy could influence the US dollar, Treasury yields and precious-metal prices.

Market participants will also watch US Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday for further clues on the trajectory of monetary policy.

Gold prices are particularly sensitive to movements in interest rates and the dollar. A stronger dollar generally makes bullion more expensive for holders of other currencies, while expectations of lower interest rates tend to support non-yielding assets such as gold.