Gold and silver prices crashed by up to 2% in morning deals on the MCX on Monday, 31 August, amid heavy profit-taking and weak global cues.
MCX gold October futures crashed by more than ₹2,600, or almost 2%, to drop to ₹1,53,640 per 10 grams, while MCX silver September contracts plunged by over ₹4,200, or nearly 2%, to ₹2,32,501 per kg in early deals.
The selloff in domestic gold prices followed the rout in global markets after U.S. Federal Reserve Chair Kevin Warsh’s hawkish tone at the Jackson Hole symposium.
US gold futures December contracts have crashed 4% over the last two sessions to $4,476.85 per troy ounce. However, for the month, they are still up about 10%.
Why are gold and silver prices crashing?
Warsh’s signal that the US central bank may hike interest rates to contain inflation drove bond yields higher and gold prices lower.
At the annual Jackson Hole symposium in Wyoming last Friday, hinted that the Fed may have to raise rates if inflation does not fall to 2%.
The US PCE (Personal Consumption Expenditure) increased 3.7% year-on-year in July, showing inflation remained above the Fed’s 2% target for the 65th straight month.
The US 10-year bond yield is now at 4.74%, rising for four consecutive sessions, while the 30-year bond yield is at 5.22%, up for the third consecutive session.
Interest-rate hikes tend to weigh on gold prices by raising the opportunity cost of holding the non-yielding asset, particularly when they push real yields higher.
The ongoing US-Iran conflict is also a negative for gold, as it has lifted energy prices, raised demand for the dollar, and increased the risk of an inflation flare-up and the resulting rate hikes.
strikes early Monday after US forces struck Iranian rocket launchers on the Strait of Hormuz in their first military action in a month on Sunday.
Gold and silver prices: Key levels to watch
According to Ravi Singh, Chief Research Officer at Master Capital Services, MCX gold prices remain under pressure after forming a double-top pattern on the daily chart, with the recent sharp sell-off indicating profit-booking at higher levels.
“Immediate support is placed at ₹1,55,000, while a decisive breach could extend the correction towards ₹1,51,000. On the upside, ₹1,58,000 remains a key resistance zone, and unless prices reclaim this level, the near-term strategy remains sell on rise,” said Singh.
Manoj Kumar Jain of Prithvifinmart Commodity Research said gold has support at $4,440 and $4,400 while resistance is at $4,540 and $4,585 per troy ounce, and silver has support at $64.40 and $63, while resistance is at $67.70 and $69.10 per troy ounce in today’s session.
Jain said MCX gold has support at ₹1,55,000 and ₹1,53,350, and resistance at ₹1,57,500 and ₹1,58,850, while silver has support at ₹2,40,000 and ₹2,37,700, and resistance at ₹2,45,000 and ₹2,48,500.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.