Gold, silver prices tumble on fading US Fed rate cut hopes. What should investors do?

Gold and silver prices opened in the red on Friday, November 21, extending gains for a second session in a row as fading hopes of a US interest rate cut continued to dampen sentiment for the precious metals. The latest US Fed Minutes indicated a split among Federal Reserve officials over the need for rate cuts, torn between concerns about a weakening labor market and persistent inflation. Traders now assign just a 30% chance of a rate cut next month, down from 50% a day earlier.

On the MCX, December gold futures were down Rs 355 or 0.3%, slipping to Rs 1,22,372 per 10 grams. Silver futures also mirrored weak trends and witnessed a downtick, falling Rs 2,341 or 1.52% to Rs 1,51,810 per kilogram.

The Fed meeting minutes revealed a divided Federal Reserve that cut rates last month despite concerns that easing too soon could undermine progress on inflation, which has remained above the 2% target for over four years. Governor Powell reinforced a cautious tone, stating that a December rate cut is not a “foregone conclusion.”

“Gold prices declined as markets absorbed a stronger-than-expected U.S. September jobs report, which tempered hopes for a December rate cut,” Manav Modi of Motilal Oswal said. The dollar index also remained firm against its major crosses, sustaining above the 100 mark. The Labor Department’s closely watched release—postponed due to the government shutdown—showed nonfarm payrolls in September rising by 119,000, more than double the projected 50,000 increase, reinforcing the narrative of a resilient labour market.

In the international market, the yellow metal eased slightly after a stronger-than-expected U.S. jobs report strengthened expectations that the Federal Reserve will hold off on cutting interest rates at its December meeting. Spot gold dipped 0.1% to $4,072.87 per ounce at 0242 GMT, while U.S. gold futures for December delivery rose 0.3% to $4,071.90.

Among other precious metals, spot silver fell 0.5% to $50.35, platinum gained 0.4% to $1,521.41, and palladium was steady at $1,377.50. Gold, however, was still on track for its strongest weekly gain in more than a month, although a firmer dollar continues to make the metal more expensive for non-U.S. buyers.Gold—being a non-interest-bearing asset—typically finds favour in low-rate environments and during periods of economic strain. Meanwhile, the reopening of the U.S. government after a record 43-day shutdown eased some investor jitters and restored the normal release of economic indicators.

How should you trade gold?

“At MCX, gold is having support at Rs 1,22,000-1,21,400 and resistance at Rs 1,23,300-1,24,000, while silver is having support at Rs 1,53,000-1,51,500 and resistance at Rs 1,55,500-1,57,000. We suggest waiting for some corrective dips for initiating fresh long positions in gold and silver,” Manoj Kumar Jain of Prithvifinmart Commodity Research said.

Gold rates in physical markets

Gold Price today in Delhi

Standard gold (22 carat) prices in Delhi stand at Rs 91,232/8 grams, while pure gold (24 carat) prices stand at Rs 99,520/8 grams.

Gold Price today in Mumbai

Standard gold (22 carat) prices in Mumbai stand at Rs 91,112/8 grams, while pure gold (24 carat) prices stand at Rs 99,400/8 grams.

Gold Price today in Chennai

Standard gold (22 carat) prices in Chennai stand at Rs 91,992/8 grams while pure gold (24 carat) prices stand at Rs 1,00,360/8 grams.

Gold Price today in Hyderabad

Standard gold (22 carat) prices in Hyderabad stand at Rs 91,112/8 grams, while pure gold (24 carat) prices stand at Rs 99,400/8 grams.

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