Gold, silver prices down 1% today: Here we decode why
What's the story
Gold and silver prices have witnessed a decline of up to 1% in early trading today. The fall comes due to profit-booking amid rising oil prices, which have raised concerns over possible rate hikes by the US Federal Reserve and other major central banks around the world. MCX gold October futures were down 0.55% at ₹1,55,090 per 10gm while MCX silver September contracts fell 1% to ₹2,35,655 per kg today.
Market influence
Brent crude oil prices above $91 per barrel
The crude oil benchmark Brent crude is trading above $91 per barrel amid stalled US-Iran talks.
Iran is said to be taking a more aggressive stance while the US has ruled out extending the ceasefire, sparking fears of possible energy supply disruptions through the Strait of Hormuz.
This geopolitical tension has kept oil prices high for most of the year, potentially prolonging inflation and prompting central banks to consider rate hikes.
Rate impact
Interest rates likely to affect gold prices
Higher interest rates, which are a response to rising inflation, tend to weigh on gold prices as it is a non-yielding asset.
Investors are now turning their attention to the minutes of the Fed's July policy meeting due for release on Wednesday.
The next US Fed policy meeting is scheduled for September 15-16 this year, with expectations that the central bank will keep rates steady in September.
Market outlook
What do markets expect?
The market's expectations for the Fed's September meeting will largely depend on the July Personal Consumption Expenditures (PCE) price index, due on August 26.
PCE inflation has remained above 2% since early 2021.
In July, the US Consumer Price Index (CPI) rose by 0.1% month-on-month after a 0.4% drop in June, with year-on-year CPI increasing by 3.4%.