Gold And Silver Extend Losses As Stronger Dollar, Fed Rate Outlook Weigh On Prices

Gold and silver prices fell sharply in early trade on the Multi-Commodity Exchange (MCX) on Wednesday, July 1, as a firmer U.S. dollar and rising U.S. Treasury yields reduced the appeal of precious metals.

At around 9:10 am, MCX gold futures for August delivery were trading 0.86% lower at ₹1,41,300 per 10 grams. MCX silver futures for September delivery declined 2.06% to ₹2,23,850 per kg.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The weakness in domestic bullion mirrored global trends, with investors factoring in expectations of tighter U.S. monetary policy.

June Sees Sharp Correction In Bullion

Gold and silver ended June with steep monthly losses after concerns over persistent inflation strengthened expectations of additional interest rate increases by the U.S. Federal Reserve.

According to MCX data, domestic spot gold prices fell by ₹15,100, or nearly 10%, during June to ₹1,40,864 per 10 grams. Silver declined by ₹38,250, or almost 15%, to ₹2,25,125 per kg as of June 30.

Internationally, gold recorded its sharpest quarterly decline since 2013, extending losses for a fourth consecutive month.

Dollar Strength Pressures Prices

The continued appreciation of the U.S. dollar has remained a key headwind for bullion. The dollar index rose more than 2% in June and was trading near 101.35, making gold and silver more expensive for holders of other currencies.

Market participants are increasingly pricing in the possibility of multiple Federal Reserve rate hikes later this year. The next meeting of the U.S. Federal Open Market Committee (FOMC) is scheduled for July 28-29.

Investors are also awaiting comments from Federal Reserve Chair Kevin Warsh, along with the June ADP employment report due later in the day and the U.S. non-farm payrolls data scheduled for Thursday, for further guidance on the interest rate outlook.

Meanwhile, geopolitical uncertainty remained in focus after Reuters reported that Iranian representatives were not expected to meet U.S. officials following renewed hostilities.

Key Technical Levels

Manoj Kumar Jain of Prithvifinmart Commodity Research said gold has immediate support at $3,994 and $3,955 per troy ounce, while resistance is placed at $4,074 and $4,110. For silver, support levels are seen at $57.70 and $56, with resistance at $61.20 and $62.80.

On MCX, Jain identified support for gold at ₹1,41,100 and ₹1,40,000, while resistance stands at ₹1,43,350 and ₹1,44,200. Silver has support at ₹2,25,500 and ₹2,22,000, with resistance at ₹2,31,000 and ₹2,34,400.

Ravi Singh, Chief Research Officer at Master Capital Services, said the August gold contract continues to hold above the ₹1,40,500 support level, adding that a break below this mark could trigger further selling. Jigar Trivedi, Senior Research Analyst at IndusInd Securities, said weakening global trends could pull MCX gold futures towards ₹1,41,000 per 10 grams.