Precious metals continued to drift lower on Friday, 15 May, as a strengthening US dollar and persistent US inflation dampened expectations of near-term Federal Reserve rate cuts. Meanwhile, traders also appeared to be booking profits following the recent rally that had pushed silver to multi-month highs.
Comex gold prices dropped $171 per troy ounce, hitting a two-week low and extending losses for the second straight session. Silver plunged even further, falling $9.16 per troy ounce to the day’s low of $76.17 per ounce, as rising oil prices erased much of the white metal’s recent gains.
With today’s sharp decline, both metals are on track to close the week with heavy losses, with gold down 4.15% and silver falling 5.48%. Earlier this week, silver reached the highest level in two months.
US consumer prices climbed to multi-year highs in April, dampening hopes of Federal Reserve rate cuts and boosting demand for the dollar and other yield-bearing assets, making bullion less attractive to investors.
Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, said, “Gold prices edged lower as rising oil prices, a stronger dollar, and higher US yields weighed on sentiment following reports of a vessel seizure and another ship sinking.”
Expectations for US interest rate cuts have largely faded, according to CME Group’s FedWatch tool, following sharp energy-driven increases in April producer and consumer inflation. Benchmark 10-year US Treasury yields climbed close to one-year highs, raising the opportunity cost of holding non-yielding assets such as gold.
The analyst further said that the series of inflation reports released this week highlighted the risk that higher energy prices could spill over into broader goods and services inflation, further reducing hopes for near-term Federal Reserve rate cuts.
According to Kotak Securities, the sharp rebound in energy prices has strengthened expectations that the Federal Reserve may keep interest rates elevated for longer, driving US Treasury yields close to one-year highs and boosting the dollar index by more than 1% this week.
The brokerage added that near-term sentiment for precious metals remains pressured by elevated yields, persistent inflation, and dollar strength. However, ongoing geopolitical uncertainty and inflation risks linked to the energy market may continue to provide underlying long-term support for bullion prices.
MCX gold drops over ₹3,800; silver slips below ₹2.70 lakh
Tracking losses in the international market, the near-month gold futures contract on MCX dropped ₹3,828 per 10 grams to the day’s low of ₹1,58,150. However, the yellow metal remains on track to close the week with gains of over 3%, as domestic prices moved higher after the government increased customs duty on precious metals.
Silver futures on MCX fell even more sharply, declining ₹22,598 per kilogram to hit the day’s low of ₹2,68,504, marking a fall of ₹36,387 from Wednesday’s high of ₹3,04,891. The sharp correction in prices has trimmed the white metal’s weekly gains to a modest 2%.
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