Gold Dips, Silver Rises Amid Fiscal Worries & Hawkish Fed

Precious metals presented a mixed trading picture on August 20, with spot gold experiencing a dip while silver registered an advance. This movement occurred amidst shifting market dynamics influenced by US fiscal developments and Federal Reserve expectations.

Key Market Movements

• Spot Gold: Dipped 1.26% to $4,466.13 an ounce.
• Spot Silver: Advanced 0.47% to $67.3.
• MCX Gold October Futures: Dropped 0.15% to Rs 1,56,331 per 10 grams.
• MCX Silver September Futures: Rose 0.41% to Rs 2,37,750 per kg.

Gold had initially surged to its highest level since early June following the US Treasury’s unexpected long-term bond buybacks, which contributed to lower yields and a weaker dollar. However, these gains were swiftly erased as US debt exceeded $40 trillion, triggering heightened concerns about the nation’s fiscal sustainability.

Further pressure emerged from the July FOMC minutes, which revealed a hawkish stance among policymakers, indicating openness to additional rate hikes due to persistent inflation risks. Current market probabilities suggest a 69% chance of the Fed holding rates in September, with a 31% chance of a hike.

Kotak Securities anticipates near-term volatility for both gold and silver, citing expected profit-taking and the hawkish Federal Reserve outlook. Despite this, the firm maintains a bullish medium-term perspective for the yellow metal.

Medium-Term Bullish Drivers

• Fiscal risks
• Dollar weakness
• Treasury-market instability
• Persistent demand for gold as a portfolio hedge

For traders monitoring price action, specific support and resistance levels have been identified across various precious metal contracts.

Spot Gold Levels

• Support: $4,444.3, $4,420.7, and $4,344.3.
• Resistance: $4,520.7, $4,544.3, and $4,620.7.

MCX Gold October Futures Levels

• Support: Rs 1,57,205, Rs 1,56,650, and Rs 1,54,853.
• Resistance: Rs 1,59,001, Rs 1,59,556, and Rs 1,61,353.

Spot Silver Levels

• Support: $65.7, $65.1, and $63.16.
• Resistance: $67.65, $68.25, and $70.19.

MCX Silver September Futures Levels

• Support: Rs 2,36,716, Rs 2,35,311, and Rs 2,30,763.
• Resistance: Rs 2,41,264, Rs 2,42,669, and Rs 2,47,217.

While gold faces immediate headwinds from profit-taking and hawkish central bank signals, its fundamental appeal as a safe-haven asset appears to be strengthening over the medium term. Investors will closely watch upcoming economic data and further policy signals from the Federal Reserve.