Bullion futures weaken on US Fed rate outlook

Bullion futures declined sharply on Tuesday as gold and silver prices came under pressure due to a stronger US dollar and rising expectations of another US Federal Reserve rate hike later this year.

On the MCX, gold futures for August delivery fell 1% to ₹1,46,668 per 10 grams in afternoon trade. Silver futures for July delivery dropped even more sharply, falling 3% to ₹2,28,023 per kilogram.

The weakness in domestic bullion futures mirrored global trends. On COMEX, gold slipped 1.3% to $4,150.1 per ounce, while silver dropped 4.4% to $62.66 per ounce.

According to the All India Sarafa Association, gold of 99.9% purity dropped ₹3,000, or 2%, to ₹1,49,300 per 10 grams, including taxes. Silver declined more sharply, plunging ₹10,500, or 4.3%, to ₹2,35,000 per kg, its lowest level in over two months.In global markets, spot gold slipped nearly 2% to around $4,121 per ounce, while silver fell over 4% to $62.27 per ounce.  Market sentiment also turned cautious after expectations of tighter monetary policy in the US strengthened. Traders see a higher possibility of a Fed rate hike in September, following hawkish signals from policymakers. 

Higher interest rates generally reduce the appeal of bullion because gold and silver do not offer interest income. 

Analysts said the downside in bullion futures could remain limited due to easing crude oil prices and improving geopolitical sentiment. Progress in ongoing US-Iran peace talks has helped cool crude prices, reducing inflation concerns and improving broader market sentiment. Reports suggest the US has temporarily eased sanctions on Iran, allowing oil exports until August, while discussions on releasing frozen Iranian funds have also advanced.<  Investors are now closely watching the upcoming US Personal Consumption Expenditures (PCE) data, the Federal Reserve’s preferred inflation indicator, due on Thursday.