Gold prices extend decline to fourth straight day; falls around Rs 1,400/10 gm: Can investors buy the dip?

Gold and silver prices on December 19, 2024: Precious metal prices continued to trade under pressure in Thursday's trade after the hawkish Fed guidance for rate cuts in 2025. On the MCX, towards the close of the morning session, gold February futures were down by 0.42 per cent or Rs 321 at Rs 76,332 per 10 gm.

In the previous day's trade, Gold February futures contract settled at Rs76,653 per 10 grams with a loss of 0.28 per cent and silver March futures contract settled at Rs90,380 per kilogram with a loss of 0.54 per cent. Gold and silver extended its fall on Wednesday.

The lower interest rates tend to augur well for precious metals as it lowers the opportunity cost of holding non-interest yielding bullion.

In 4 sessions, gold prices have fallen nearly Rs 1,400 per 10 gm. 

The U.S. Fed in its latest policy meet has resorted to interest rate cut on expected lines but the hawkish guidance on future rate cuts is putting pressure across asset classes. The U.S. Fed said in a statement that recent indicators suggest that economic activity continues to expand at a solid pace. 

In the international markets, spot gold traded 1.25 per cent higher at around $2,618 per ounce, close to its day's high price.

Notably, the job market in the US is showing signs of improvement; unemployment rate has moved up but remains low. Inflation has made progress towards the FED’s target rate of 2.0 per cent but remains somewhat elevated.

Manoj Jain, commodity expert, India Nivesh said, "The U.S. FED cuts 2025 rate cut chances of earlier 100 basis points to 50 basis points could push precious metals lower."

We expect gold and silver prices to remain under pressure after FED hawkish guidance and now $2,588 and $29.88 per troy ounce is make or break levels for gold and silver. If prices are unable to hold this key support levels on a weekly closing basis the short term trend would be negative for both metals, he added.

However, long term trend of gold and silver remains positive. Gold has support at $2610-2588, while resistance at $2670-2684 per troy ounce and silver has support at $29.88-29.50, while resistance is at $30.84-31.20 per troy ounce in today’s session. On the MCX, gold is having support at Rs 76,000-75,350 and resistance at Rs 77,000-77,500 while silver is having support at Rs 88,800-87,000 and resistance at 91,200-92,000.

For long term investors, its an opportunity to add precious metals at lower levels but could wait for markets to stabilise.