Gold falls nearly 3% for the week as US rate hike expectations strengthen

Gold prices declined by nearly 3 per cent over the week as investors reassessed the outlook for US monetary policy amid stronger employment data and inflationary pressure from rising crude oil prices.

On Friday, October gold futures on the Multi Commodity Exchange edged up 0.03 per cent to Rs 1,52,815, while September silver futures slipped 0.07 per cent to Rs 2,37,500.

In the physical market, 24-carat gold was priced at Rs 1,54,884 per 10 grams on Friday, compared with Rs 1,59,578 a week earlier, according to the India Bullion and Jewellers Association. This represented a weekly decline of almost 3 per cent.

Precious metals experienced considerable volatility during the week, touching a three-month high before recovering from a steep sell-off in the middle of the week and retreating once again on Friday. Trading was influenced by geopolitical tensions, changing expectations surrounding the US Federal Reserve and American labour-market data.

Bullion initially drew support from geopolitical uncertainty and weakness in the US dollar. However, crude oil prices surged following an escalation in the US-Iran conflict, including Iran’s retaliatory attack on Kuwait after renewed US strikes on Iranian rocket launchers near the Strait of Hormuz.

The oil rally intensified inflation concerns and prompted markets to increase their expectations of a Federal Reserve rate hike in September. The resulting rise in US Treasury yields and strengthening of the dollar outweighed demand for gold as a safe-haven asset, triggering a correction in precious-metal prices.

Sentiment briefly improved during the middle of the week after weaker-than-anticipated US labour data and dovish comments from Federal Reserve officials revived expectations of a softer monetary-policy stance.

The recovery proved temporary, however, as the US employment report for August significantly surpassed market forecasts on Friday. The stronger figures drove Treasury yields and the dollar higher, reversing much of the dovish shift seen earlier in the week, analysts said.

For Comex gold, analysts placed immediate resistance in the $4,500-$4,530 range and support between $4,330 and $4,360. On the MCX, resistance is expected between Rs 1,56,500 and Rs 1,57,000, while support is seen in the Rs 1,51,500-Rs 1,52,000 range.