Gold rate on MCX declined over 1.5% on Thursday tracking losses in international bullion prices, while silver prices plunged more than 4% ahead of the release of key economic data in the US.
MCX Gold rate was down by ₹1,159, or 1.68%, at ₹67,793 per 10 grams. MCX silver price traded lower by ₹3,343, or 3.94%, at ₹81,551 per kg.
In the international commodity market, gold prices fell as investors booked profits ahead of US economic data that could offer more cues on when the central bank will cut interest rates this year and by how much, Reuters reported.
Spot gold fell 0.9% to $2,377.29 per ounce, while US gold futures dropped 1.6% to $2,376.70.
“We observed sharp declines in gold and silver prices in the Asian markets due to heightened risk aversion, driven by escalating economic concerns in China. However, strong possibilities of Fed rate cuts in the September policy meetings could provide some support for prices,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Weakness in domestic gold and silver prices also comes after the government slashed customs duties on the two precious metals to 6%.
Gold rate on MCX has dropped by nearly 5.2% so far in July so far, the biggest monthly drop since May 2021 when it finished the month with a decline of 4.59%. Analysts believe gold has a major support at ₹65,800 level.
“As we can see here, the 50% retracement level is around ₹65,800 per 10 grams - a major support for now. After weeks of consolidation (Box Formation), it made a decisive move in July. A pull back is possible but the outlook has turned weak,” said Jigar Trivedi, Senior Research Analyst - Currencies & Commodities, Reliance Securities.
On the flip side, Trivedi believes festival season buying, weak dollar, US elections, US Federal reserve rate cut uncertainty and safe haven buying may give some short term support to the yellow metal.
Meanwhile, silver prices have been notably weaker than gold in recent weeks and have dropped by nearly 9.2% or more than ₹8,000. Weakness in industrial metals and sluggish manufacturing activity in the US and the EU along with weak Chinese demand continue to weigh on silver prices.
MCX silver price has fallen by 8.50% so far in July, the biggest monthly fall since September 2020 when it declined by 11.1%, Trivedi noted.
“Since silver has declined so sharply, we don’t deny the possibility of a rebound. But the chart structure is weak. For Comex Silver, this could be the third monthly drop as it dropped by 1.4%, 5.08% in May and June and 4.4% so far in July. The undertone in the bullion commodities have turned weak as the market has almost discounted a rate cut by the Fed in September but the uncertainty remains beyond September Fed action,” Trivedi said.
Going ahead, according to him, ₹80,000 - 79,000 is a short term support, but overall a strong support hovers around ₹73,000 level for the MCX silver. Comex silver may find some support near $26.20 per ounce.
“The outlook is weak. strategy should be to sell on bounce,” Trivedi said.
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