Gold prices slightly down while on course for best month since March

Gold opened on the Multi Commodity Exchange (MCX) on Wednesday at Rs 60,820 per 10 grams and hit an intraday low of Rs 60,680. In the international market, prices hovered around $1979.7 per troy ounce. Meanwhile, silver opened at Rs 71,325 per kg, hit an intraday low of Rs 70,953 on the MCX, and hovered around $22.62 per troy ounce in the international market.

Praveen Singh, Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas, said, “Spot gold closed with a loss of 0.57% at $1984 Tuesday as barring occasional clashes of Israel with Hezbollah and the Syrian allies of Iran, the ongoing conflict with Hamas is so far largely contained, though there are reports of Houthis from Yemen firing salvos, too. Israel’s measures of ground incursion in Gaza continue. A recovery in the US Dollar Index also pressurised the metal.”

While the Israel-Hamas war still showed no signs of de-escalation, traders began pricing in a lower risk premium from the conflict, given that no other Arab powers appeared to have joined in so far, leading to some profit booking on the lower end.

“A significant part of gold’s 9% rally from $1810 has come on the possibility of other regional powers joining the present Middle East war, a scenario which is yet to materialise even after three and a half weeks into the war. Gold will face downside pressure unless the conflict broadens,” added Singh.

Also read: Here's what you need to know about different forms of gold you can buy and their tax treatment

Also read: Support for gold continues as central banks maintain historic buying in Q3: World Gold Council report

Also read: Gold and silver prices today: Yellow metal trades flat, hovers around psychological level of $2,000

The US Dollar Index reversed its decline to close 0.60% higher at 106.70 on markets remaining unimpressed with the Bank of Japan's slight tweak of allowing 1% to be used as a reference point rather than a limit for ten-year yield moves. The Eurozone and the US data helped the Dollar Index further.

Manav Modi, Analyst, Commodity and Currency, MOFSL, said, "Gold price inched lower but was set for its best month since March as the Israel-Hamas war sparked safe-haven flows, while the focus shifted to this week’s U.S. central bank policy meeting."

Strength in the dollar and US Yields before the Fed meeting also weighed on bullions. Market participants are anticipating another hawkish pause, where Governor Powell could continue to follow the data-dependent script and build expectations for one more rate hike.

CME Fed-Watch tool suggests that bets for a pause in this week's Fed policy meeting are more than 95%. On the data front, US Consumer confidence data was reported higher than expectations at 102.60 v/s 100.50, weighing on gold and silver prices.

“The Bank of Japan further loosened its grip on long-term interest rates by tweaking its bond yield control policy once again. Along with Fed, focus this week will also be on Bank of England’s policy meeting and US jobs market data,” said Modi.