Gold futures on the Multi Commodity Exchange (MCX) witnessed a sharp decline on Wednesday, dropping by Rs 159 to settle at Rs 71,942 per 10 grams. The fall was driven by weak global cues and a strengthening US dollar, which made the yellow metal less attractive for investors.
Factors Behind the Decline
The decline in gold futures was largely attributed to the appreciation of the US dollar against major currencies. A stronger dollar typically exerts pressure on gold prices as it makes the commodity more expensive for holders of other currencies. Additionally, rising bond yields in the United States further dampened the appeal of non-yielding assets like gold.
Global economic uncertainties and expectations of tighter monetary policy by central banks also contributed to the bearish sentiment. Investors are closely monitoring the US Federal Reserve's stance on interest rates, which could influence gold prices in the near term.
Market Performance
On the MCX, gold for delivery in June 2025 contracts traded lower, reflecting the overall bearish trend in the precious metals segment. Silver futures also witnessed a decline, falling by Rs 1,200 to Rs 83,500 per kilogram. The drop in silver prices mirrored the movement in gold, as both metals are often influenced by similar macroeconomic factors.
Analysts suggest that the short-term outlook for gold remains uncertain, with prices likely to remain volatile amid fluctuating global economic data and geopolitical developments. However, some experts believe that the long-term fundamentals for gold remain strong, given its status as a safe-haven asset during times of economic turmoil.
Global Cues
In the international market, spot gold prices traded lower at around $2,350 per ounce, down from the previous session's close. The decline was supported by a stronger US dollar index, which rose to 104.5 levels. Meanwhile, the US 10-year Treasury yield edged higher, adding to the pressure on gold.
Market participants are now awaiting key economic data releases from the US, including inflation figures and jobless claims, which could provide further direction for gold prices. Any signs of persistent inflation might prompt the Federal Reserve to maintain higher interest rates for longer, which would be negative for gold.
Investment Outlook
Despite the recent weakness, gold has remained a popular investment choice among retail and institutional investors. Central banks across the world have been increasing their gold reserves, signaling confidence in the metal's long-term value. In India, demand for gold is expected to pick up ahead of the wedding season, which could support prices in the domestic market.
However, for now, the momentum remains bearish, and traders are advised to exercise caution. The immediate support for gold on the MCX is seen at Rs 71,500 per 10 grams, while resistance is placed at Rs 72,500 per 10 grams.
