Gold and silver prices edged higher in international markets on Monday, October 26, after both metals recorded sharp losses last week. Investors are assessing the outlook for US interest rates, elevated bond yields and crude oil prices ahead of the US Federal Reserve’s policy decision on October 27-28.
On COMEX, gold futures were trading at $4,009.50 per ounce, up $1.60, or 0.04%, in the latest available data on October 26. Silver futures were at $54.150 per ounce, up $0.201, or 0.37%.
The modest gains follow a steep weekly correction.
COMEX gold futures fell $173.20, or 4.14%, last week to settle at $4,007.90 per ounce, while silver futures declined $3.35, or nearly 6%, to $53.95 per ounce.
In the domestic market, gold futures for December delivery on the Multi Commodity Exchange (MCX) fell ₹5,768, or nearly 4%, last week to settle at around ₹1.42 lakh per 10 grams. Silver futures declined ₹15,087, or 7.14%, to ₹1.96 lakh per kg.
Why are gold and silver prices under pressure?
US Federal Reserve policy outlook
The US Federal Reserve’s October 27-28 meeting is a key near-term trigger for bullion prices. Investors will look for signals from the policy statement and the Fed chair’s commentary on inflation, interest rates and the outlook for monetary easing.
Gold does not pay interest, making it relatively less attractive when yields on interest-bearing assets rise. If the Fed signals that interest rates could remain elevated for longer, gold and silver could face further pressure. A less hawkish stance could support a recovery, although the extent would depend on how markets interpret the guidance.
Higher US bond yields and a stronger dollar
Elevated US Treasury yields and a stronger dollar have weighed on precious metals. Higher yields increase the opportunity cost of holding gold, while a stronger dollar makes dollar-denominated bullion more expensive for buyers using other currencies.
These factors have limited recovery attempts after the recent correction, leaving prices sensitive to changes in interest-rate expectations.
Rising crude oil prices and inflation concerns
Crude oil prices are another factor to watch. Brent crude settled above $117 per barrel last week, according to the market commentary provided by analysts, raising concerns that higher energy costs could keep inflation elevated.
Persistent inflation could prompt central banks to maintain restrictive monetary policies for longer or consider further rate hikes. This could weigh on non-yielding assets such as gold, even though bullion can also attract safe-haven demand during periods of geopolitical uncertainty.
Brent crude eased to $115.48 per barrel in early Asian trading on Monday, down 1%, as reports of diplomatic efforts to reduce regional tensions in West Asia offered some relief to oil markets.
Silver faces additional industrial-demand concerns
Silver has fallen more sharply than gold in the recent correction. Besides its role as a precious metal, silver is widely used in industrial applications, making its price sensitive to industrial demand and the broader outlook for economic activity.
Pranav Mer, senior vice president for EBG – Commodity and Currency Research, JM Financial Services, attributed silver’s decline to weakness across industrial metals and gold, alongside softer demand as industries explore alternatives or reduce silver usage in response to high prices.
This industrial exposure can make silver more sensitive than gold to changes in growth expectations and demand conditions.
What should investors watch this week?
Apart from the Fed’s policy decision, investors will track US core personal consumption expenditures (PCE) inflation, third-quarter GDP growth, durable goods orders and consumer confidence data. Policy decisions from the European Central Bank and the Bank of Japan, along with developments in the Russia-Ukraine conflict and West Asia, could also influence market sentiment.
Jateen Trivedi, vice president and research analyst for commodity and currency, LKP Securities, said the near-term outlook remained cautious, with gold likely to remain under pressure until there is greater clarity on the Fed’s policy path.
A hawkish message could strengthen the dollar and push bond yields higher, adding to the pressure on bullion. Conversely, a less hawkish signal could prompt short covering and provide some relief to prices, Trivedi said.
The price movement also comes as buyers prepare for Dhanteras, when gold and silver purchases are considered auspicious. However, the recent correction in bullion prices and uncertainty over the US Federal Reserve’s policy outlook could influence buying decisions this festive season.
-With agencies inputs
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.
