Gold price dropped significantly in the domestic futures market Monday morning, tracking weak global cues and gains in the dollar. Moreover, a strong US jobs report punctured expectations of a 50 bps rate cut by the US Fed in November.
MCX Gold for December 5 contracts traded 0.21 per cent lower at ₹75,980 per 10 grams around 9:10 am.
As Reuters reported, the US job gains increased by the most in six months in September, and the unemployment rate fell to 4.1 per cent. This indicated the US economy was in good shape and the US Fed need not go aggressively on rate reduction.
According to CME's FedWatch tool, the market now sees a 95 per cent chance that the Fed will cut rates by only 25 bps in November.
Healthy macro numbers strengthened the US dollar, which weighed on the yellow metal. Since gold is priced in the dollar in the international markets, a rise in the US currency makes bullion expensive in other currencies.
Investors are now turning their attention to the release of the US Fed's last meeting minutes on Wednesday, October 9. Then, on Thursday, the US Consumer Price Index (CPI) data for September will be released, followed by the Producer Price Index (PPI) data on Friday.
Comments of several US Fed officials, who are speaking this week, will also be in focus.
Gold tends to gain in a low-interest-rate environment and during political and economic uncertainty.
At the current juncture, the escalating situation in the Middle East is a key positive for gold. If the Israel-Iran war escalates further, it could deal a severe blow to riskier equities and trigger a hectic buying of safe haven assets.
However, dwindling hopes of a deeper rate cut and the dollar's rise could limit gold's gains.
Manoj Kumar Jain of Prithvifinmart Commodity Research expects gold and silver prices to remain volatile this week amid volatility in the dollar index and geopolitical tensions. However, on a weekly closing basis, they are expected to hold their support level of $2,600 and $30.88 per troy ounce.
"Gold has support at $2,658-2,644, while resistance at $2,688-2,704 per troy ounce and silver has support at $32.15-31.80, while resistance is at $32.70-33 per troy ounce in today’s session," said Jain.
"On the MCX, gold has support at ₹75,850-75,600 and resistance at ₹76,500-76,740 while silver has support at ₹92,500-91,800 and resistance at ₹94,200-95,100," Jain said.
Jain suggests buying gold on dips around ₹75,850 with a stop loss of ₹75,500 for the target of ₹76,400 and silver around ₹92,800 with a stop loss of ₹91,950 for the target of ₹95,000.
According to Rahul Kalantri, VP of commodities at Mehta Equities, gold has support at $2,631-$2,610, with resistance at $2,662-$2,678. Silver has support at $31.82-$31.68 and resistance at $32.35-$32.52.
In the Indian rupee terms, gold has support at ₹75,880- ₹75,670, with resistance at ₹76,450- ₹76,650. Silver has support at ₹92,850- ₹92,050, while resistance is at ₹94,130- ₹94,980, said Kalantri.
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