Gold and silver prices declined for the third straight day on Tuesday, driven by a strengthening US dollar and rising Treasury yields. The dollar index edged higher, making dollar-denominated commodities more expensive for holders of other currencies, thereby dampening demand.
Factors Behind the Decline
The US dollar strengthened as investors bet on more aggressive interest rate hikes by the Federal Reserve to combat inflation. This has led to a sell-off in precious metals, which are typically seen as hedges against inflation but become less attractive when interest rates rise. Additionally, the yield on the 10-year US Treasury note climbed, further reducing the appeal of non-yielding assets like gold and silver.
Market Performance
On the Multi Commodity Exchange (MCX), gold futures for June delivery fell by 0.5% to Rs 51,200 per 10 grams, while silver futures for July delivery dropped 0.8% to Rs 63,500 per kilogram. In the international market, spot gold slipped to $1,850 per ounce, and silver declined to $22.10 per ounce.
Analysts expect further downside for precious metals in the near term as the US dollar remains strong and the Federal Reserve maintains its hawkish stance. However, geopolitical tensions and economic uncertainties could provide some support to safe-haven assets.
Outlook
Market participants are closely watching the upcoming US inflation data and Federal Reserve minutes for cues on the pace of monetary tightening. A higher-than-expected inflation reading could accelerate rate hikes, putting additional pressure on gold and silver prices. Conversely, any signs of easing inflation or dovish Fed commentary could trigger a rebound in precious metals.
