Precious metals continued to drift lower for the third straight session on Tuesday, 23 June, as expectations of a US Federal Reserve rate hike strengthened, boosting demand for the US dollar globally and making dollar-denominated commodities more expensive for holders of other currencies.
Comex gold futures remained under pressure, falling another $94 per troy ounce to an intraday low of $4,108, erasing most of the gains accumulated in recent sessions.
Silver prices, which are generally more volatile than gold, declined sharply by $4.05 per troy ounce to a low of $61.53, marking their lowest level since late March.
The latest decline has extended silver’s June losses to 18%, putting it on track for its biggest monthly drop since March, when it plunged 20%. From its January peak of $121.78 per ounce, the white metal has now corrected nearly 50% based on Tuesday’s low.
Although tensions in the Middle East have eased, the earlier disruption kept energy prices elevated for more than three months, pushing US inflation higher. Rising inflation has prompted policymakers to revise their forecasts upward and signal the possibility of further interest rate hikes.
The last week indicated that an interest rate hike may be required later this year to bring inflation back toward its 2% target. Higher interest rates typically reduce the appeal of gold and silver, as precious metals do not generate any yield.
Traders now see an 86% probability of a rate hike by December, up from 61% before last week’s Fed meeting, according to the CME FedWatch Tool.
In addition, expectations of tighter monetary policy tend to strengthen the US dollar, making dollar-denominated commodities such as gold and silver more expensive for investors holding other currencies.
The US Dollar Index rose for a fourth consecutive session, climbing to 101.3 against a basket of major currencies, its highest level since April last year.
On the geopolitical front, the United States waived sanctions on Iran for 60 days from Monday following the initial talks under a nascent peace agreement, although hostilities in Lebanon continued, according to officials.
Earlier, US Vice President said talks with Iranian officials in Switzerland had laid a solid foundation for a final peace agreement, while tanker traffic through the previously disrupted Strait of Hormuz had started to recover, Reuters reported.
MCX gold hovers around ₹1.45 lakh; silver slips below ₹2.30 lakh
Tracking weakness in global markets, the near-month gold futures contract on to an intraday low of ₹1,45,510. However, the metal recovered some of the losses and later traded lower by around ₹1,500.
Meanwhile, near-month silver futures plunged ₹8,644 per kilogram to an intraday low of ₹2,25,666. Silver prices were last seen around these levels in late March.
With Tuesday’s decline, silver’s month-to-date losses widened to 15%, wiping out all the gains recorded in May. From its record high of ₹4,57,328 per kg, the metal has now fallen by nearly ₹2.32 lakh, or about 50%.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.