Gold Prices Slide Amid Strong Dollar and Rising Treasury Yields

Gold Prices Slide Amid Strong Dollar and Rising Treasury Yields

VoM News Desk | September 27, 2023 | 12:04 PM IST | Breaking News | Follow on Google News

Gold Prices Slide Amid Strong Dollar and Rising Treasury Yields

Gold prices experienced a decline in morning trade within the domestic futures market on Wednesday, echoing the global trend. This drop was attributed to a surge in the US dollar and Treasury yields, fueled by expectations of prolonged higher interest rates.

Dollar Strength and Gold’s Vulnerability

Gold prices found themselves trading near their lowest levels in over a month on Wednesday, primarily due to the dominance of a strengthening US dollar. This trend emerged as financial markets adjusted to the likelihood of increasing interest rates, as reported by Reuters. The strong dollar exerted downward pressure on gold, as the precious metal is priced in dollars. When the dollar strengthens, it tends to make gold less attractive to investors, contributing to a decline in gold prices.

Impact on Investment

Investor sentiment was further reflected in the holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, which reached a more than four-year low, as reported by Reuters. The reduced interest in gold was driven by the diminishing appeal of holding the precious metal in a high-interest rate environment. In such conditions, other interest-bearing investments like bonds become more attractive to investors.

MCX Gold Performance

In the specific case of MCX Gold for the October 5 series, it traded 0.32% lower, standing at ₹58,245 per 10 grams around 10:45 am. Experts anticipated ongoing weakness and heightened volatility in gold prices due to the strengthening dollar and rising bond yields, coupled with the prospects of further increases in interest rates.

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Expert Views and Price Levels

Rahul Kalantri, VP of commodities at Mehta Equities, provided insights into potential support and resistance levels for gold and silver. He noted, “Gold has support at $1,890-1,879 while resistance is at $1,917-1,928. Silver has support at $22.65-22.52, while resistance is at $23-23.15. In the Indian rupee terms, gold has support at ₹58,250, ₹58,080 while resistance is at ₹58,580, ₹58,750. Silver has support at ₹71,100-70,550, while resistance is at ₹72,240–72,750.”

Manoj Kumar Jain of Prithvifinmart Commodity Research shared similar expectations of volatility for gold and silver, citing the strength in the dollar index and US bond yields. Jain suggested selling silver around ₹71,900 with a stop loss of ₹72,400 and a target of ₹70,950.

ICICI Direct’s Analysis

Brokerage firm ICICI Direct weighed in on the situation, predicting a potential decline in spot gold prices to the $1,880 level as long as it remains below $1,910 (the 200-day EMA) amid the prevailing strength of the dollar. Additionally, ICICI Direct anticipated MCX Gold prices to trend towards the ₹58,250 level as long as they trade below the resistance level of ₹58,750. MCX Silver was also expected to follow suit, moving lower towards ₹71,200 level as long as it sustains below ₹72,350 level.

VoM News Desk

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