Why is Gold Price Down Today: MCX Gold Falls Below ₹1.55 Lakh as Oil Prices Rise
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MCX gold slipped below Rs 1.55 lakh per 10 grams on Tuesday as profit-booking set in after Monday's rally, with rising crude oil prices reviving worries over a delayed Fed rate cut.
Gold prices fell in early trade on Tuesday, August 18, as investors booked profits after the metal's recent gains, while a fresh rise in crude oil prices revived concerns over inflation and the US Federal Reserve's interest-rate outlook.
MCX Gold October futures fell 0.55% to ₹1,55,090 per 10 grams around 9:25 am IST, compared with Monday's close of ₹1,55,940. MCX Silver September futures also declined 1% to ₹2,35,655 per kg from the previous close of ₹2,38,048.
In the international market, spot gold slipped below $4,400 an ounce after settling above $4,415 in the previous session. Gold had gained nearly 1% on Monday, helped by a weaker US dollar and lower expectations of a Federal Reserve rate hike.
Why Is Gold Price Falling Today?
The rise in crude oil prices has put pressure on gold as markets reassess the inflation and interest-rate outlook.
Brent crude held above $91 a barrel on Tuesday, while WTI traded above $85. Oil prices had jumped nearly 3% on Monday after the US-Iran ceasefire memorandum signed in June formally lapsed.
US President Donald Trump has ruled out extending the arrangement with Tehran, while Iran's foreign ministry has indicated limited willingness to resume talks. A separate Iran-Oman channel aimed at restoring traffic through the Strait of Hormuz also remains unresolved.
The uncertainty has kept the risk premium in crude oil elevated.
Higher oil prices can add to inflationary pressures and reduce expectations of near-term interest-rate cuts. This is negative for gold, which does not offer any interest income.
US Dollar Recovers; Fed Outlook in Focus
The US dollar also recovered on Tuesday after briefly falling below 99.30, its lowest level in two months.
The dollar index moved towards 99.60 after stronger-than-expected US economic data. August Empire manufacturing activity rose to a four-and-a-half-year high, while the NAHB housing index also improved unexpectedly.
Markets are now pricing in around a 33% probability of a September rate move, down from about 51% a month ago.
Investors are awaiting the minutes of the Fed's July meeting for further clues on the central bank's policy outlook. Markets will also watch the Jackson Hole symposium, along with upcoming US employment and housing data.
Gold: Key Levels to Watch
According to Kotak Neo Research, spot gold has support at $4,360 and $4,341 an ounce, while resistance is placed at $4,422 and $4,441 an ounce.
On the MCX, Gold October futures have support at ₹1,54,230 and ₹1,53,754 per 10 grams, with resistance at ₹1,55,772 and ₹1,56,248.
Kotak Neo Research has maintained a sideways-to-bearish bias on MCX Gold October futures, with a broader trading range of ₹1,49,160-₹1,55,150 per 10 grams.
What Investors Should Watch
Gold prices are likely to remain sensitive to movements in crude oil, the US dollar and Treasury yields in the near term.
The Fed meeting minutes and upcoming US economic data will be closely watched for fresh signals on interest rates. Meanwhile, developments around the US-Iran conflict and the Strait of Hormuz could continue to influence crude prices and, in turn, inflation expectations.
For now, higher oil prices, profit-booking and a recovery in the US dollar have weighed on bullion after its recent rally.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto is a business journalist with 8+ years of experience in financial journalism. She covers equity markets, corporate earnings, IPOs, commodities and the economy.
As a reporter with leading business publications, she has tracked financial markets and covered sectors including banking and financial services, retail, consumer goods, advertising and e-commerce.
Outside work, she enjoys travelling, discovering local cultures and spending time in nature.
