Gold entered the second week of September in an uncomfortable position after its strongest monthly performance since January, climbing over 10% in August to close near $4,450 per ounce and briefly approaching $4,700 for the first time since mid-May. However, the metal has spent the first week of September giving back ground, closing mildly lower around $4,430 as markets reprice Fed rate expectations. Fed Governor Christopher Waller struck a cautious tone, indicating he would support holding rates steady provided disinflation trends continued, and that commentary briefly pushed gold above $4,500 as rate-hike expectations retreated. However, the move unwound sharply after US August payrolls arrived at 162,000 against a consensus near 56,000, a substantial upside surprise compounded by a meaningful upward revision to July's initially weak print. The dollar and yields moved higher, gold surrendered its gains, and the first week of September closed mildly lower around $4,430. As per Kotak Securities, the mechanics of the reversal are straightforward, with the dollar's subsequent softening to near two-month lows around 98.6 providing some cushion.
Silver ETFs experienced significant selling pressure on Friday, September 11, with major funds declining over 3% as global silver extended its steep sell-off. Silver ETFs witnessed a steeper sell-off, with ICICI Prudential Silver declining 3.09% to ₹226.45 in one quote, while another quote showed the ETF down 2.72% at ₹227.14. The sharper fall in silver comes as the precious metal has also faced pressure in global markets, with Reuters reporting that spot silver was down around 4% for the week, while gold was headed for its third consecutive weekly decline. The weakness comes amid sharp repricing of US interest-rate expectations, with stronger-than-expected producer inflation and surging crude prices adding to concerns that the Federal Reserve could raise interest rates at its policy meeting next week. US producer prices rose 0.4% in August, following an upwardly revised 0.1% increase in July, with traders subsequently raising expectations of a Fed rate hike to around 70% probability from about 64% before the data. Silver has faced additional pressure from weakness in global prices, with futures positioning remaining heavily skewed towards long positions at around 228,000 net contracts, leaving room for a sharper unwind.
Gold ETFs came under pressure on Friday, with most funds trading lower amid weakness in the underlying precious metal. Invesco India Gold was the biggest decliner among gold ETFs, falling 1.01%, while SBI Gold, Axis Gold, HDFC Gold and ICICI Prudential Gold also traded lower. Nippon India Gold BeES, the most actively traded gold ETF, declined 0.75% to ₹125.25, with other major gold ETFs including ICICI Prudential Gold, SBI Gold, HDFC Gold and Axis Gold slipping between 0.66% and 0.76%. At the time of the quoted market data, gold prices were down 0.47% at $4,386.70 an ounce, with the precious metal on track for a third consecutive weekly decline as stronger rate-hike expectations lifted the dollar and bond yields. Gold ETFs have largely seen declines of less than 1%, although individual funds such as Invesco India Gold have fallen more sharply. The latest ETF moves point to a near-term cooling in investor appetite for bullion, particularly silver.
Gold ETFs attracted ₹2,596.70 crore in August, marking a nearly 67% month-on-month increase from ₹1,558.75 crore in July, based on data from the Association of Mutual Funds in India (AMFI). Silver ETFs also saw strong investor interest, recording inflows of ₹1,270.63 crore during the month. Combined, gold and silver ETFs attracted around ₹3,867 crore in August, with overall ETFs recording inflows of ₹10,160.87 crore during the month. Equity ETFs accounted for ₹7,237.49 crore of the inflows, while debt ETFs witnessed outflows of ₹944.97 crore. The decline in precious metals has been driven by a combination of higher US interest-rate expectations and rising Treasury yields, with stronger-than-expected US producer-price data increasing bets that the Federal Reserve could maintain a tighter monetary policy stance.
MCX Gold is likely to remain under pressure in the near term as the price structure continues to form lower highs and lower lows, indicating a negative and bearish setup. According to Abhilash Koikkara, Head - Forex & Commodities at Nuvama Professional Clients Group, prices may continue to trade within a consolidation range in the short term; however, a decisive breakdown from this phase could trigger another leg of selling. On the downside, 148,000 is likely to act as the first important support level, with a break below this level potentially extending the decline toward 145,000. On the upside, 159,000 remains a crucial resistance level, and unless MCX Gold decisively breaks and sustains above this resistance, the broader short-term trend is expected to remain weak. The technical setup continues to favor a sell-on-rise approach, with traders closely watching the 148,000 and 145,000 levels as potential downside targets. A sustained move above 159,000 would weaken the bearish view and could indicate a potential trend reversal.
The Fed's September 16 meeting is now genuinely live, with markets assigning roughly 50-60% probability to a 25 basis point hike, a meaningful shift from the hold-majority pricing that prevailed through much of August. Historically, alternative assets have been vulnerable to hawkish Fed stances due to the typical impact on yields and the dollar index. However, the current environment differs from previous cycles due to uncertain global conditions, rising demand for stores of value, and potential dollar debasement risks from rate hikes. Tushar Badjate from Badjate Stock & Shares Pvt Ltd noted that gold and silver have come under pressure as expectations of a US Federal Reserve rate hike at the 16 September meeting have risen sharply this week, with the odds hovering around 50-60% following hotter-than-expected PPI data. He expects that a hawkish surprise could extend the decline, while a hold or dovish tone could trigger a quick reversal. Markets were also awaiting the US Consumer Price Index (CPI) data on Friday, which could provide further clues on the Fed's interest-rate trajectory, with a hotter-than-expected CPI reading potentially putting further pressure on gold and silver through higher yields and a stronger dollar.
