Gold futures on the Multi Commodity Exchange (MCX) fell sharply by Rs 2,308 per 10 grams in early trade on Wednesday, as a firm US dollar and rising crude oil prices weighed on bullion demand. The August gold contract traded at Rs 68,190 per 10 grams, down from the previous close of Rs 70,498.
Global Cues Drive Decline
In the international markets, Comex gold futures for August delivery dropped USD 94.69, or 2.28 per cent, to USD 4,062.71 per troy ounce in New York. The decline mirrored a broader sell-off in precious metals as investors shifted focus to riskier assets amid expectations of further interest rate hikes by the US Federal Reserve.
The US dollar index, which measures the greenback against a basket of six major currencies, strengthened to 104.50, making gold more expensive for holders of other currencies. Meanwhile, Brent crude oil futures rose above USD 85 per barrel, stoking inflationary concerns and reducing the appeal of gold as a hedge.
Impact on Domestic Market
Analysts attributed the sharp fall in domestic gold futures to the combination of a stronger dollar and higher crude prices, which typically dampen demand for the yellow metal. According to market experts, the near-term outlook for gold remains bearish as the Fed signals more rate hikes to combat inflation.
Silver also witnessed a decline, with MCX silver futures falling by Rs 1,200 to Rs 74,500 per kilogram. The precious metals complex is likely to remain under pressure until macroeconomic headwinds subside.
Analyst Commentary
"The strength in the US dollar and the uptick in crude oil prices are negative for gold," said a senior analyst at a leading commodity brokerage. "Investors are pricing in a more aggressive Fed stance, which is pushing yields higher and reducing the appeal of non-yielding assets like gold."
The analyst added that support for gold could emerge around Rs 67,500-68,000 levels, but a break below that may trigger further selling. On the upside, resistance is seen at Rs 70,000 per 10 grams.
Market Outlook
Market participants are now awaiting key US economic data, including non-farm payrolls and consumer price index (CPI) figures, for further direction. A strong labor market and sticky inflation could reinforce the case for rate hikes, putting additional pressure on gold prices.
In the domestic spot market, gold of 99.9 per cent purity was quoted at Rs 68,400 per 10 grams, down from the previous day's level of Rs 70,600. Traders reported muted demand as buyers adopted a wait-and-watch approach amid price volatility.
