Gold, silver inch up on MCX but global pressure weigh on sentiment

Gold and silver opened marginally higher on October 23 but the bullion market remained cautious as global weakness weighed on sentiment.

On the Multi Commodity Exchange (MCX), gold mini November futures were trading at Rs 1,21,873 for 10 grams, up 0.66 percent, at 10.33 am. Silver mini November futures also moved higher, rising 0.38 percent to Rs 1,48,148 a kilogram.

Gold mini futures had settled at Rs 1,21,069 and silver at Rs 1,47,583 the previous day. These marginal upticks do little to offset the sharp global decline seen this week.

Globally, gold is under pressure, as it inches closer to the $4,000 an ounce level. The metal slipped as investors turned cautious after an extended rally to record highs.

Spot gold was trading 0.5 percent lower.  “Gold witnessed a sharp decline of 385 points (8 percent) from its recent peak, marking a potential trend reversal after reaching historically overbought levels. Monday’s close recorded the highest monthly Relative Strength Index (RSI) ever observed, indicating exhaustion in bullish momentum and setting the stage for a corrective phase,” said Tejas Shigrekar, Chief Technical Research Analyst – Commodities and Currencies at Angel One Ltd.

With India’s festival season nearing its end, seasonal physical demand is expected to taper off, leaving prices vulnerable.

“We anticipate further downside into November and December. Investor sentiment has shifted and traders are increasing their exposure to put options, positioning for continued weakness in the coming months,” Shigrekar said.

Long-term play

Expectations of further interest rate cuts by the US Federal Reserve this year have lowered real yields, reducing the opportunity cost of holding non-yielding assets such as gold.

Investors increasingly view gold as a safe- haven amid a softer monetary environment, said Renisha Chainani, head-research, Augmont.

Central banks across the world, particularly in Asia and the Middle East, have significantly increased gold purchases. Strategic accumulation by central banks, including those in India, China, and Russia, signalled confidence in gold as a reserve asset, further tightening the market and providing strong support to prices, said Chainani.

International gold, which is around $4,080, is expected to find support near $3,800 and further lower at $3,670. Resistance is likely near $4,190, and only a sustained move above $4,260 would negate the current bearish tone, Shigrekar said.

Despite the near-term weakness, bullion remains supported by long-term factors such as central bank gold purchases, global geopolitical tensions and expectations of lower interest rates, expert said.

Long-term investors should accumulate gradually on dips rather than enter aggressively at once. Systematic exposure through gold and silver ETFs or sovereign gold bonds remains a prudent strategy to navigate volatility, they said.