Gold slips on rising bond yields, dollar; traders eye FOMC minutes for further cues

Gold slips on rising bond yields, dollar; traders eye FOMC minutes for further cues

By Saumil Gandhi

In the previous week, bullion prices extended losses due to the upward march in US bond yields and the dollar index. On the other hand, Federal Reserve policymakers have lowered investor expectations on the interest rate front with ‘hawkish’ comments, which have bolstered the possibility of additional rate hikes despite recent U.S. inflation numbers showing a softening trend. In the energy pack, crude oil prices saw some stability after a seven-straight-week rally, while its fundamentals remain supportive as multiple reports forecast an increased demand outlook and tight global inventories in the second half of 2023. Last week, base metal commodities like copper and zinc saw a significant decline of 3 to 4 percent due to worries over China’s property sector and the prevailing deflation risk in China.

Comex Silver closed around five weeks lows at $22.67, a loss of almost 4% on a weekly basis. The Money managers have flipped from bullish to bearish on silver as short positions outnumbered long ones by 3,753, while Long-only positions fell 13,178 lots to 31,888, which was the lowest in 20 weeks. On the domestic front, the MCX Silver September contract fell below the 70000 mark for the first time after July 23 and settled with a loss of 3.45% on a weekly basis.

For the upcoming trading session

Market participants will keep an eye on major economic events such as Industrial production numbers from China and the U.S. and the FOMC minutes, which will be released on Wednesday. We maintain our moderate-to-bearish outlook on bullion for this week. We believe the gold price is continuing its slow slide towards the $1,870 level as uncertainty lingers over whether the Federal Reserve will raise interest rates one more time in this cycle.

From a technical perspective

Comex gold has immediate support at $1895/oz; a fall below the $1895 level opens a downside target at the $1870 level; and it has resistance at $1945 for this week. while the MCX Gold October contract is expected to move in the range of Rs 58,200 to Rs 59,600. Comex Silver is expected to trade in the range of $21.25 to $23.60, while MCX Silver is expected to move in the range of Rs 67,800 to Rs 71,500.

(Saumil Gandhi, Senior Analyst – Commodities, HDFC Securities Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)