Why Did Gold and Silver Prices Plummet on MCX After the Fed Rate Cut?
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Synopsis
Gold and silver prices tumbled on the MCX after the Fed's recent rate cut. Investors are now cautious, considering the Fed Chair's uncertain stance on future cuts amidst ongoing US-China trade talks. What could this mean for precious metals moving forward?
Key Takeaways
- Gold prices fell to Rs 1,18,839 per 10 grams after the Fed's rate cut.
- Silver prices decreased to Rs 1,44,670 per kilogram.
- The Fed's cautious stance led to profit-taking in precious metals.
- Ongoing US-China trade talks are influencing market sentiment.
- The dollar index's decline made gold cheaper for foreign investors.
Mumbai, Oct 30 (NationPress) Gold and silver prices experienced a significant decline on Thursday on the Multi Commodity Exchange (MCX) following the US Federal Reserve's announcement of a 25-basis point rate cut.
The drop in precious metals occurred as investors evaluated the Fed's cautious outlook regarding future rate cuts. On the MCX, gold futures opened down by 1.27 percent at Rs 1,19,125 per 10 grams, compared to the prior close of Rs 1,20,666.
Silver prices also fell, opening 0.4 percent lower at Rs 1,45,498 per kilogram, down from the previous close of Rs 1,46,081. By 9:42 AM, gold prices had continued to decline, trading lower by Rs 1,827, or 1.51 percent, at Rs 1,18,839 per 10 grams.
Silver too saw a decrease, down by Rs 1,411, or 0.97 percent, at Rs 1,44,670 per kilogram. Meanwhile, in the international market, gold prices saw a slight uptick due to a minor drop in the US dollar.
Spot gold rose by 0.2 percent to $3,937.88 per ounce, while US gold futures for December delivery fell by 1.2 percent to $3,950.70 per ounce.
The dollar index decreased by 0.2 percent after reaching a two-week high in the previous session, which made gold more affordable for investors holding other currencies.
On Wednesday, the US Federal Reserve revealed its second interest rate cut of the year, lowering the benchmark rate to a range of 3.75 percent to 4.00 percent.
However, Fed Chair Jerome Powell expressed a cautious perspective, indicating that officials were divided on the future direction of monetary policy and that an additional rate cut this year was 'far from certain.'
Globally, investors are also monitoring developments between the US and China, as market participants await potential trade deal discussions between US President Donald Trump and Chinese President Xi Jinping.
Experts noted, 'The Fed Chair’s cautious stance on further easing prompted profit-taking. Moreover, optimism surrounding the upcoming US-China trade talks, where Presidents Trump and Xi may finalize a deal, diminished safe-haven demand.'
They further stated, 'Governor Powell mentioned that officials are struggling to achieve consensus on future monetary policy and that the financial markets should not presume another rate cut will take place by the end of the year.'
Point of View
It is imperative to analyze the implications of the Fed's recent rate cut on precious metals. The cautious tone of Fed Chair Jerome Powell suggests that future monetary policy remains uncertain, impacting investor sentiment. Moreover, the interplay between US and China trade negotiations adds another layer of complexity. Monitoring these developments is essential for understanding market trends.
NationPress
01/11/2025
Frequently Asked Questions
What caused the drop in gold and silver prices?
The decline was primarily due to the US Federal Reserve announcing a 25-basis point rate cut, which led investors to reassess future monetary policies.
How did the US dollar's performance affect gold prices?
The US dollar index fell, making gold relatively cheaper for investors holding other currencies, which typically influences gold prices positively.
What did Fed Chair Jerome Powell say about future rate cuts?
Fed Chair Jerome Powell indicated that officials are divided on the future of monetary policy and that another rate cut later this year is 'far from certain.'
What are the current prices for gold and silver on MCX?
As of now, gold is trading at Rs 1,18,839 per 10 grams, while silver is at Rs 1,44,670 per kilogram.
Are there any ongoing trade discussions affecting market sentiment?
Yes, investors are closely watching the potential trade deal discussions between US President Donald Trump and Chinese President Xi Jinping, which could influence market dynamics.
