Gold prices drop by Rs 1,700 intraday as dollar flexes muscles on Fed decision. Should you buy, sell or hold?

Gold prices fell by Rs 1,709 per 10 gram or 1.7% to hit the intraday low of Rs 95,381 on the MCX, taking cues from the international yellow metal prices. The fall was on account of a stronger dollar index (DXY) which shot up above the 100 mark against a basket of six top currencies. The trigger was the Federal Reserve‘s hawkish commentary on inflation while leaving the policy rates unchanged.

Around 1 pm on Thursday, June gold contracts were trading at Rs 95,824, falling by Rs 1,266 per 10 gram or 1.3% over previous closing price of Rs 97,090.

Meanwhile, on the COMEX, yellow metal futures were trading at $3,340.50 per troy ounce, falling by $51.40 or 1.52%.

In a unanimous decision, the rate setting panel referred to as the Federal Open Market Committee (FOMC) chose to leave interest rates at 4.25%-4.5%. There has been a status quo since December after a series of cuts in the second half of 2024. Chairman Jerome Powell expressed uncertainty over whether the US economy would sustain its current progress or decelerate due to increasing inflation and international political tensions.

Fed has been at the loggerheads with the Trump administration over the rate regime with the latter stressing over the need to slash them.

Price movement in non-yielding gold is inversely related to the dollar movement. Fed’s rate cuts will likely give fresh impetus to this precious metal. “Comex Gold halted its two-day winning streak, closing over 2% lower in the previous session after the Federal Reserve opted to maintain interest rates at current levels. However, the downside was partially retracted as the Fed highlighted concerns about economic headwinds stemming from tariff-related uncertainties. In early trade today, gold regained some ground amid renewed caution surrounding the US-China trade negotiations, which reinforced its status as a safe-haven asset,” Axis Securities said in a note.Commenting on the day’s action, Renisha Chainani, Head – Research at Augmont said that gold has reclaimed $3,400 in the international market, though the tariff war uncertainty has revived. Moreover, geopolitical tensions in the Middle East, Eastern Europe, and India-Pakistan along with stock market uncertainty, is fueling the yellow metals prices with gold gaining 2% on the weekly basis.

Gold prices have given a breakout above Rs 96,000) and it seems this rally will continue towards Rs 98,000 again, Chainani said.

He has placed support at Rs 92,000 while resistance at Rs 97,500.

Colin Shah, MD, Kama Jewelry expects gold prices to remain elevated with mild volatility, hovering in the range of Rs 96,000 to Rs 97,000.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)