Gold extends decline for 2nd week as dollar strength, Fed tone weigh on sentiment

New Delhi, Nov 1 (PTI) Gold prices extended their decline for the second consecutive week as improved global risk appetite, a strong dollar, and the US Federal Reserve's cautious tone of further rate cuts have dampened the demand for safe-haven asset.

On the Multi Commodity Exchange (MCX), gold futures for December delivery plunged Rs 2,219, or 1.8 per cent, over the past week.

During the past week, the yellow metal hit an intra-day low of Rs 1,17,628 per 10 grams on October 28.

GOLD's CORRECTION DEEPENS AS DOLLAR STRENGTHENS, TENSIONS EASE Both global and domestic markets saw a sharp correction early in the week, breaking a nine-week rally amid easing geopolitical tensions, stronger US dollar, and profit-booking by investors have pushed gold prices lower.

"Heavy profit-booking pushed global gold down from recent highs to test the USD 4,000 an ounce level. Domestic gold mirrored this, falling below Rs 1,19,000 per 10 grams before stabilising and recovering modestly in the latter half of the week," Sneha Jain, Investment Manager on Smallcase and Founder and CEO of WealthTrust Capital Services, said.

She added that MCX gold futures witnessed high volatility, dropping from highs above Rs 1,23,000 per 10 grams to a low of nearly Rs 1,18,000 before rebounding to around Rs 1,21,500.

Strong US dollar also contributed to gold's decline.

"The US dollar Index surged... after the Fed's comments, making dollar-priced gold more expensive for foreign buyers and triggering selling. Rising bond yields earlier in the week also made non-yielding bullion less attractive," Jain added.

In the international markets, Comex gold futures for December delivery fell by USD 141.3, or 3.41 per cent, during the week, to settle at USD 3,996.5 per ounce on Friday.

The decline came after gold briefly touched fresh highs in early October, before heavy profit-taking set in.

The rupee was relatively stable but traded with a weakening bias against the US dollar. A weaker rupee, which makes gold imports costlier, provided a slight buffer that limited domestic prices from falling as sharply as their global counterparts, she said.

Sandip Raichura, CEO of Retail Broking & Distribution and Director at PL Capital, said, the previous week's developments were largely negative for gold as it entered in a sharp correction territory.

"Tensions between Russia and Ukraine eased, Trump-Xi talks were positive, Fed remained hawkish on rates and India's festival buying season ended. In summary, all the events were gold negative in the short-term, and it was natural for the metal to lose some steam," he said.

SILVER REBOUNDS AFTER TURBULENT TWO WEEKS Silver, which outshone gold during the recent rally, saw a significant swings during the week. The white metal saw volatile movements before staging a mild recovery towards the end of the week.

On the MCX, silver futures for December delivery ended nearly a two-week losing streak by rising Rs 817, or 0.55 per cent.

"Silver futures experienced a larger crash, falling from near Rs 1,55,000 per kilogram to test Rs 1,45,000 per kg, before regaining some ground," said Sneha Jain, of WealthTrust Capital Services.

In the overseas markets, Comex silver futures remained largely flat in the past week, when it ended at USD 48.16 per ounce.

N S Ramaswamy, Head of Commodities & CRM of Ventura, said comments from Fed Chair Jerome Powell moderated the metals rally by signalling that any future cuts would depend on macroeconomic data.

"After hitting new peaks, a natural correction phase and profit taking has occurred with the long-term structural drivers, including shifts in monetary policy, spiralling US debt, central bank buying, persistent inflation and geopolitical risks -- remain bullish," he added.

Analysts said sustained accumulation by global central banks could help the yellow metal to inch close to or even go past its record highs in the coming months.

"Western sanctions have reinforced the desire of central banks to diversify away from the dollar.

"Ballooning federal debt, fiscal deficits and the ongoing government shutdown have further bolstered gold's role as a safe-haven asset amid weakening US fundamentals," Ramaswamy said. PTI HG TRB