Gold and silver prices today: Yellow metal continues to dip, dollar index trades at six-week highs

Gold prices opened on the Multi Commodity Exchange (MCX) on Tuesday at Rs 58,831 per 10 grams and hit an intraday low of Rs 58,802. In the international market, prices hovered around $1,904.70 per troy ounce. Meanwhile, silver opened at Rs 69,977 per kg and hit an intraday low of Rs 69,833 on the MCX. The price hovered around $22.51 per troy ounce in the international market.

Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas, said, "Gold prices drifted lower to linger around the support of $1900 after better-than-expected U.S. economic data further dents gold's investment appeal. U.S. core retail sales rose 1% m-o-m in July, and the headline sales were up by 0.7%, while the Y-o-Y sales were up by 3.17%, signalling that U.S. inflation is not cooling off to Fed's trajectory without policymakers raising interest rates further anytime soon."

The dollar index, at 103.22, trades at six-week highs as many key voices from the Fed indicate that the Fed is not done with raising rates amid the hot inflation. The 10-year U.S. Treasury yields are at an 8-month high level in anticipation of further rate hikes, which could soften the U.S. economy.

"The disappointing economic activities in China pushed PBoC to cut down the one-year benchmark lending rates by 15 basis points as China remains in a weaker zone with July industrial production growing at a slower pace of 3.7% Y-o-Y and retail sales at 2.5% Y-o-Y, which has raised the doubt over economy attaining 5% growth target this year. On the other hand, gold prices could see some buying interest amid the haven appeal as there remains a fear of rating downgrades of prominent U.S. banks by rate agency Fitch," said Imran.

Gold and silver languish as strong U.S. data stokes Fed rate hike woes and supports an up-move in the Dollar Index and U.S. Yields.

Manav Modi, Analyst, Commodity and Currency, MOFSL, said, "After a positive US PPI last week, U.S. retail sales also increased more than expected in July, suggesting the economy continued to expand early in the third quarter while keeping a recession at bay. Interestingly, the CME Fed-Watch tool shows more than 90% probability of a pause in Sep meet, while Fed officials are preparing the market for a rate hike, keeping market participants on edge."

Minneapolis Fed President Kashkari said that while the U.S. central bank has progressed in its inflation fight, interest rates may still need to go higher to finish the job.

"Amidst these higher interest rate expectations, benchmark 10-year U.S. Treasury yields hit an almost 10-month high and Dollar index traded around their 7-week highs. Focus today will be on the UK CPI, EU GDP, US IIP and FOMC meeting minutes. SPDR holdings extended declines to hit their lowest level since January 2020 at 894.43 metric tons," said Modi.

Outlook: Gold seems fragile and looks to test the support of $1890/$1885(spot), while any news related to rating downgrades in the U.S. could see gold prices pumping toward the resistance of $1930/$1940.

Amit Khare, Associate Vice President at GCL Broking, said, "October Gold closed at 58974(0.11%) and September Silver closed at 69954(-0.04%). Bullion daily charts are trading near the oversold zone. Any time we can see short covering rallies in bullions. Momentum Indicator RSI also indicates the same, So traders are advised to make fresh buy positions in Gold and Silver near given support level one with the stop loss of support level two and book near given resistance levels: Gold October Support 58800/58600 and Resistance 59200/59500. Silver September Support 69500/69000 and Resistance 70500/71000."