Gold Prices Continue To Soften; Silver Plunges Sharply: How Will Precious Metals Move Going Further

As we write at around 8:45 pm, August gold futures are down by 0.46% or Rs. 231 at Rs. 50,498 per 10 gm, while silver July futures have pared intraday losses marginally after hitting day's low of Rs. 58000 per 10 gm. Last silver traded at Rs. 58,100, down 1.63% or Rs. 961 per kg.

Gold Prices Continue To Soften; Silver Plunges Sharply: How Will Precious Metals Move Going Further

In the international markets, spot gold is down even sharply by 0.64% at $1806.2 per ounce. Likewise, Gold COMEX (August'22) traded weak by close to 0.6% at $1806.7 per ounce.

Pressure has been mounting on the precious yellow metal on the back of firm dollar and aggressive monetary tightening measures by global central banks. Notably, gold tends to behave inversely to dollar index and the treasury yield. And as dollar is being supported on the back of high inflation and fears of recession (uncertain global economic outlook), gold is losing its sheen. Also, at the same time, aggressive monetary tightening and resulting interest rate hikes tend to weigh on gold as gold being non-yielding asset begins to lose its value. This is because the opportunity cost of holding bullion in such a case increases.

Gold's performance so far

As per a report, gold price is set to fall for the third straight month and so far in the quarter has eroded in price by over 6%. Further as per the Kitco website, the fall in gold price in the last 1 month has been to the tune of 1.52%, while it has descended by a tad of 0.28% in 6-months period. On a 1-year basis, the returns from gold are still positive and at 2.22%. Likewise, 5-year returns stand at 45.79%.

City Index senior market analyst Matt Simpson is cited as saying in a leading publication that "a combination of rising yields and U.S. dollar have played their part of gold underperformance, nevertheless also noted that gold priced in other currencies hadn't performed too badly.
Worth mentioning that gold prices in the second quarter have erased the gains made earlier during the year as the quarter is seen to end close to $1800 per oz levels, the level at which we kicked-off the fresh calendar year i.e. just a tad higher than $1800. In the first quarter, primarily the bullion's appeal got a boost on the back of weak equities, risk-off sentiment due to the heightened Russia-Ukraine crisis.

Gold price outlook going ahead

Ilya Spivak, a currency strategist at DailyFX in a leading online publication is cited as saying that "Looking forward, the bias will become increasingly bearish as rate hikes continue to come through and bring down inflation expectations, and that $1,780-$1,790 is a critical support level.

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