New Delhi: Gold and silver markets are heading into September under pressure after a sharp weekly sell-off, with investors now turning their attention to US employment data, Federal Reserve policy expectations and geopolitical tensions involving Iran.
Analysts expect to remain volatile in the coming week as traders assess fresh economic indicators and attempt to gauge the possibility of a Federal Reserve policy change in September.
Investors will track manufacturing and services PMI readings from major economies, including India, along with inflation data from the Eurozone and Germany. US non-farm payrolls, due later in the week, are also expected to be a key market trigger.
“The coming week is likely to remain highly volatile, with market participants attempting to price in the probability of a September Federal Reserve policy change,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Gold, silver suffer sharp weekly losses
Gold futures for October delivery on the Multi Commodity Exchange (MCX) fell ₹6,157, or 3.8 per cent, last week to ₹1.56 lakh per 10 grams.
Silver futures for September delivery declined ₹9,893, or 4 per cent, to ₹2.36 lakh per kilogram.
Trivedi said gold had undergone a steep correction during the week, falling from around ₹1.63 lakh to ₹1.56 lakh per 10 grams.
“MCX Gold witnessed a sharp correction last week, falling from around Rs 1.63 lakh to Rs 1.56 lakh per 10 grams, resulting in a decline of nearly over Rs 6,000 from the weekly peak and a negative weekly closing of more than 3 per cent,” Trivedi said.
Pranav Mer, Senior Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd, said selling pressure became particularly intense on Friday following Federal Reserve Chair Kevin Warsh’s speech.
His comments on inflation and monetary policy prompted profit booking across bullion markets, Mer said.
Internationally, Comex gold futures for December delivery fell USD 150.7, or 3.2 per cent, to end the week at USD 4,680.6 per ounce. Silver futures dropped USD 2.56, or 3.64 per cent, to USD 67.78 per ounce.
US jobs data, Fed decision in focus
With September underway, market participants are expected to monitor a series of US labour-market indicators closely.
These include non-farm payrolls, unemployment figures and the ADP non-farm employment change. The data could influence expectations about the Federal Reserve’s policy decision ahead of its September meeting, Mer said.
A weaker or stronger-than-expected labour market reading could alter expectations around interest rates, with the dollar and bullion prices potentially responding accordingly.
Iran tensions add uncertainty
Geopolitical developments could further amplify volatility in commodity markets.
Traders are expected to continue watching the US-Iran conflict, while developments surrounding the Strait of Hormuz could have implications for crude oil prices and inflation expectations.
Higher oil prices could complicate the inflation outlook and, in turn, influence expectations about the Federal Reserve’s monetary policy.
Silver outpaces gold in August
Despite the sharp weekly correction, silver remained the stronger performer during August.
According to Gaurav Garg, Head of Research at Lemonn Markets Desk, silver gained around 21 per cent during the month, compared with a 15.7 per cent rise in gold.
The coming week’s combination of economic data, currency movements, central-bank expectations and geopolitical developments could determine whether gold finds stability after its recent decline or faces another round of profit-taking.
“The combination of dollar movement, labour-market data, Fed expectations and geopolitical headlines is likely to determine whether gold stabilises after the recent correction or enters another phase of profit booking.” Trivedi said.