Gold and silver prices retreated on Friday, 31 July, as a rebound in the US dollar and hawkish comments from Federal Reserve officials weighed on investor sentiment. The pullback came after both precious metals posted strong gains in the previous session on the back of a weaker dollar.
Comex gold futures fell $84 per troy ounce to an intraday low of $4,076, giving up part of Thursday’s $124 rally. Despite the decline, the yellow metal remained 1.5% higher for July, putting it on track to register its first monthly gain since February.
Silver also gave back part of its recent gains, falling $1.80 per troy ounce to $57.22. Unlike gold, however, the white metal remained under pressure for the month and was on track to end July down about 4%, marking its second consecutive monthly decline.
The weakness in precious metals coincided with a recovery in the US Dollar Index, which rebounded to 100.3 on Friday. Even so, the index remained down nearly 1.5% for the week, its steepest weekly decline in three months, while extending its monthly loss to 1.3%.
The US Federal Reserve earlier this week kept its benchmark interest rate unchanged at 3.50%-3.75%. However, the decision was far from unanimous, with three policymakers dissenting and voting in favour of an immediate rate hike.
On Friday, the dissenting officials reiterated that further monetary tightening is necessary to bring inflation back to the target level and prevent price pressures from becoming entrenched.
Inflation has remained above the Fed’s 2% target for more than five years and accelerated again following the recent conflict involving Iran and the inflationary impact of President Donald Trump’s tariffs.
Although inflationary pressures eased in June following a sharp decline in energy prices, policymakers remain concerned that renewed increases in commodity prices could reverse that progress.
Those concerns have intensified as the renewed escalation in the US-Iran conflict has pushed crude oil prices higher, raising the risk that elevated energy costs could reignite inflation in the coming months.
Higher interest rates typically weigh on non-yielding assets such as gold by increasing the opportunity cost of holding bullion.
Meanwhile, crude oil prices remained elevated on Friday, even as tanker traffic through the Strait of Hormuz reportedly increased after a recent slowdown, allowing millions of barrels of crude to pass through the critical shipping route.
MCX gold and silver remain volatile
In the domestic market, the near-month MCX gold futures contract edged up ₹168 per 10 grams to an intraday high of ₹1,44,224, extending its recovery after gaining ₹1,451 in the previous session.
Meanwhile, the near-month MCX silver futures contract declined ₹3,527 per kg to ₹2,15,564.
While gold remains up 0.60% for July, silver is down 5.21%, marking its second consecutive monthly decline and its first back-to-back monthly loss in nearly two years.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
