Gold prices hit a one-week low on Thursday, May 23, extending their fall for a third consecutive session on profit-taking after minutes from the US Federal Reserve’s latest minutes-of-the-meeting indicated that interest rates would stay higher for longer, till inflation consistently nears the two per cent target.

Spot gold fell 0.9 per cent to $2,356.29 per ounce, after hitting its lowest since May 14 at $2,351 earlier in the session. The non-yielding bullion hit a record high of $2,449.89 on Monday and is up 14 per cent so far this year. On the domestic front, crude oil futures were last down 0.09 per cent at ₹71,510 per 10 gram on the multi-commodity exchange (MCX).

Also Read: US Federal Reserve minutes show officials rally around higher-for-longer rates

Spot silver fell 0.6 per cent to $30.57. The recent rally in gold and copper prices drove it to $32.5, an 11-year high earlier this week. Platinum was down 0.2 per cent at $1,033.44. The precious metal is up 11 per cent in May after a wave of forecasts of the second year of structural market deficit. Palladium lost 1.7 per cent to $982.38 under pressure from the future market share growth of electric vehicles.

Why are gold prices declining?-The market has been concerned that high gold prices could affect purchases by central banks, which were active buyers in 2022-2023, as well as demand from Chinese investors. Analysts expect them to continue with strong purchases on any price dips, and don’t expect the downside to gold prices to be pronounced.

-Gold could see the next level of support at $2,300, and signals that the Fed is ready to cut interest rates would be the next major catalyst for its price gain.

-Imports to India, the world’s second-biggest gold consumer, could fall by nearly a fifth in 2024 as high prices spur consumers to exchange old jewellery for new items, according to an industry body.

-Providing further support, platinum’s technical chart formed a golden cross – a bullish pattern – in late April when its short-term moving average pierced through a long-term moving average, according to analysts.

Also Read: Catch the glitter: Silver up 11% YTD on import volume, likely to outshine gold in near-term; How should you invest?

Where are prices headed?”Gold prices plummeted below ₹72,400, down ₹700 rupees today and ₹2,000 rupees in just three days, following the release of the Federal Reserve’s meeting minutes. The minutes indicated that the Fed is in no hurry to cut interest rates, as inflation levels are still far from the target zone of two per cent,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.

‘’This news led to a stronger dollar index and triggered profit-booking in gold, which had previously rallied to 74,000 on expectations of an interest rate cut and geopolitical tensions. However, with the Fed’s minutes pouring cold water on rate cut hopes and geopolitical tensions easing, gold prices retreated sharply,” added Trivedi.

‘’Gold and silver prices retreat from record highs, on the back of some profit booking and ambiguity regarding Fed interest rate cut and geo-political tensions. Both Gold and Silver prices posted significant gains in the past few trading session, hence some profit booking at higher levels is warranted,” said Navneet Damani, Senior VP – Commodity Research at Motilal Oswal Financial Services.

Technical View: ‘’Gold has support at $2,352-$2,335 and resistance at $2,390-$2,412. Silver has support at $30.12-$29.80 and resistance at $30.68-$30.90. In INR, gold has support at ₹72,630 and ₹72,410, with resistance at ₹73,290 and ₹74,550. Silver has support at ₹92,340 and ₹91,780, with resistance at ₹93,560 and ₹94,100,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.

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