Gold and silver prices are likely to remain volatile this week, with the US dollar, bond yields and the unresolved US-Iran tensions expected to shape the outlook for precious metals.Investors will also track the Reserve Bank of India’s monetary policy decision on Wednesday, with markets expecting a 25-basis-point rate hike. Services PMI readings from major economies, US trade data and mid-month consumer sentiment figures due later in the week will provide further cues.The outlook comes after bullion prices ended the holiday-shortened week sharply lower. On the MCX, December gold futures fell Rs 2,887, or 2 per cent, to close at Rs 1.5 lakh per 10 grams, while silver futures declined Rs 8,819, or nearly 4 per cent, to Rs 2.25 lakh per kg.“MCX gold remained under pressure last week, declining around 2 per cent as a stronger US dollar and rising bond yields intensified profit-booking across bullion and other asset classes,” Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said.Gold had initially found support from softer US employment data, which reduced expectations of aggressive monetary tightening by the Federal Reserve. That support, however, faded as investors moved to lock in gains towards the end of the week, Trivedi said.The decline was steeper in international markets. Comex December gold futures dropped $158.9, or 3.7 per cent, to $4,162.3 an ounce, while silver fell $4.38, or 6.7 per cent, to $60.41 an ounce.“Gold ended yet another week with heavy losses, with prices falling more than 3.5 per cent on a weekly basis at around $4,160 per ounce, while silver ended with a loss of over 6.5 per cent, tracking a correction across industrial metals,” Pranav Mer, Senior Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd, said.A stronger dollar and elevated bond yields remained key headwinds for bullion, while broader weakness across commodities and expectations of further rate increases by central banks also weighed on prices, Mer said.Geopolitical developments could nevertheless bring fresh volatility. Some of the war-risk premium in bullion eased following reports of increased oil flows from West Asia, although mixed signals on the possibility of further escalation have kept investors cautious, Mer said.For gold, the direction of the dollar and US Treasury yields will remain particularly important. A sustained move in the dollar above 102, or a further rise in Treasury yields, could put additional pressure on the yellow metal. Conversely, a reversal in either could offer some relief, Trivedi said.Any fresh escalation in geopolitical tensions could also revive safe-haven demand for gold and silver. However, with no clear direction emerging on the US-Iran situation, bullion prices are likely to remain caught in two-way movement, Trivedi said.
