Gold Extends Losses Amid Dollar Strength and Fed Caution
Gold prices in India declined for the third consecutive week, pressured by a strengthening US dollar and cautious remarks from Federal Reserve officials that dampened investor appetite for safe-haven assets. The sustained firmness in the greenback and the US central bank's wait-and-watch approach kept bullion trading within a narrow range during the holiday-shortened week, according to market analysts.
Domestic and Global Price Movements
On the Multi Commodity Exchange (MCX), gold futures for December delivery slipped Rs 165, or 0.14%, during the week to conclude at Rs 1,21,067 per 10 grams on Friday. The precious metal continued to hover around the Rs 1.21 lakh mark, remaining significantly below its October 17 peak of Rs 1.32 lakh per 10 grams, as reported by PTI.
In international markets, the scenario showed some variation with Comex gold futures for December rising $13.3, or 0.33%, during the week to settle at $4,009.8 per ounce on Friday. Prices briefly traded above the psychological $4,000 mark before retreating as the dollar gained strength.
Market Sentiment and Expert Views
Chirag Doshi, CIO of Fixed Income Assets at LGT Wealth India, observed that "gold traded in a tight consolidation range through the week". He noted that while bargain-buying emerged during mid-week dips, the strong directional momentum visible in October has significantly tapered. "The market appears to be in a pause-and-assess phase, waiting for cues from the US dollar and Treasury yields before larger positions are taken," Doshi added.
NS Ramaswamy, Head of Commodity & CRM at Ventura, highlighted that gold prices remain supported by expectations of another Fed rate cut. He pointed out that "the dollar index has stayed within the 98–100 range since August" and suggested that "a softer dollar could provide near-term relief for bullion."
Ramaswamy also emphasized the impact of the prolonged US government shutdown, now in its second month, which has delayed crucial economic reports including employment and inflation data. This has created what he described as a "data vacuum" that heightens market uncertainty. "Private reports indicate weakness in the labour market, which could push the Federal Reserve to ease policy rates sooner. Lower rates tend to support gold," he explained.
Doshi identified several factors influencing precious metals, noting that a stronger dollar and higher bond yields initially weighed on prices, while renewed risk aversion later in the week offered only limited support. He also highlighted a significant negative catalyst: "A key negative catalyst came from China's decision to reduce its VAT exemption on certain retail gold purchases, likely cooling physical demand sentiment in Asia."
Silver Underperforms Amid Industrial Demand Concerns
Silver followed a similar consolidation pattern but underperformed gold as industrial sentiment weakened amid global slowdown worries. On the MCX, silver futures for December delivery fell Rs 559, or 0.38%, during the week to close at Rs 1,47,728 per kilogram on Friday. Comex silver futures for December also edged lower to settle at $48.14 an ounce.
Doshi commented on silver's volatility, stating that "silver continued to show high-beta behaviour, moving more sharply than gold on both upswings and pullbacks." He observed that "short bursts of festive and industrial demand triggered quick rallies, but these were offset by profit-taking, suggesting short-term traders are driving price action."
The analyst also noted that continued ETF outflows have removed a key support factor, making domestic prices more vulnerable to global volatility. However, he pointed out that the weak rupee helped cushion losses, leading to consolidation rather than a steep correction in prices.
The precious metals market continues to navigate between competing forces of dollar strength, Federal Reserve policy expectations, and global economic concerns, with investors closely watching for clearer directional cues in the coming weeks.
