Gold, silver extend losses on MCX as dollar strength, rising yields pressure metals

On Thursday morning in India, gold and silver futures slipped lower on the Multi Commodity Exchange as two familiar headwinds pushed down prices: a climbing US dollar and Treasury yields that had climbed to their highest level in nearly two decades. October gold contracts fell 0.55 percent to 1.50 lakh rupees per 10 grams. December silver dropped more sharply, losing 1.16 percent to 2.33 lakh rupees per kilogram. The moves extended losses that had already accumulated in the previous session, when stronger-than-expected employment data from the United States had shifted market expectations toward a Federal Reserve that would hold rates higher for longer.

The mechanics of the pressure are straightforward. When Treasury yields rise, bonds become more attractive relative to gold—a metal that generates no interest income and sits inert in a vault. When the dollar strengthens, the same ounce of gold becomes more expensive for anyone holding euros, rupees, or any other currency. Both conditions were in place. The dollar index had climbed to 101, its highest point in nearly two months. The US 10-year Treasury yield had pushed to 5.11 percent, a level not seen since July 2007. Globally, spot gold was trading around $4,288 an ounce.

Analysts traced the weakness to a specific trigger: stronger-than-expected private-sector employment numbers that had rekindled inflation concerns and hardened expectations that the Fed might raise rates further. Aamir Makda, a technical analyst at Choice Broking, noted that MCX gold had simply continued its downward momentum under this pressure. Ashish Rajodiya, head of commodities at PL Capital, framed the near-term outlook as downward-biased, with spot gold likely to trade between $4,240 and $4,320 an ounce, and MCX gold between 1.49 lakh and 1.52 lakh rupees.

Yet the picture was not entirely one-directional. Vedika Narvekar, a research analyst at Anand Rathi, acknowledged that geopolitical risks continued to offer some ballast to prices. Iran's president had recently warned at the United Nations that Tehran would not permit freedom of navigation through the Strait of Hormuz while sanctions remained in place—the kind of statement that historically sends investors seeking safe havens. Rajodiya suggested that the path forward for gold would hinge on whether incoming US economic data remained robust. A continued string of strong readings would likely deepen pressure on bullion. But any sign of labor market cooling or a fresh geopolitical flare-up could draw buyers back in.

There was also a longer structural argument being made for gold that cut against the immediate headwinds. Dhruv Joglekar, an assistant fund manager at Monarch PMS, pointed out that central banks had added 23 tonnes of gold in July alone, and that China had increased its holdings for 22 consecutive months. More intriguingly, Joglekar noted that gold had continued to climb even as US real yields—the return on Treasury bonds adjusted for inflation—had risen. This suggested that the traditional inverse relationship between real yields and gold prices might be weakening. In an environment where bonds had become less reliable as insurance against inflation, gold had increasingly stepped into that role. The question hanging over the market was whether that structural support would be enough to arrest the current slide.