Gold and Silver Rates Drop on MCX as US Jobs Data Revives Rate-Hike Fears and Dollar Strengthens

The Quick Take

• MCX gold October contracts dropped 0.30% to Rs 1,52,315 per 10 grams as strong US non-farm payrolls pressured global bullion.
• Silver followed gold lower on MCX in the morning session as the US dollar strengthened on rate-hike expectations.
• Analysts see both metals in a sideways-to-negative range until clarity on Fed rate decisions emerges.

Gold and silver prices on the MCX declined in early Monday trade as stronger-than-expected US non-farm payrolls data for August revived expectations of a Federal Reserve rate hike, according to Mint Markets. MCX gold October futures dropped 0.30% to Rs 1,52,315 per 10 grams in the morning session, tracking weakness in international spot gold prices. The strong jobs print — with payrolls coming in well above consensus estimates — reinforced the dollar's strength and drove Treasury yields higher, creating a doubly unfavourable environment for non-yielding precious metals priced in US dollars. Silver similarly declined on the MCX, following the broader precious metals complex lower.

The rate-hike sensitivity of MCX gold is amplified through two channels: the direct impact of higher real US interest rates on the opportunity cost of holding non-yielding bullion, and the indirect effect of dollar strengthening on the INR-denominated gold price. A stronger dollar increases the import cost of gold in rupee terms for Indian buyers, which can suppress domestic demand even as international spot prices fall. However, for Indian investors holding MCX positions, the rupee depreciation partially cushions the INR-denominated return from a global spot price decline, creating a natural hedge for domestic gold holders that is distinct from the experience of dollar-denominated investors in London or New York.

Analysts cited by Mint expect both gold and silver to trade in a sideways-to-negative range until there is greater clarity on the Fed's September meeting decision. Key near-term watch points include the Fed's open market committee communication following the jobs report, August CPI data due in the next two weeks, and technical support for MCX gold at the Rs 1,50,000 per 10 grams level, which could attract physical buying from jewellers and domestic institutions. The macro variable that ultimately determines MCX gold's directional trend is the US dollar index: sustained dollar strength above 105 would cap any gold recovery even if geopolitical tensions from the West Asia conflict provide a partial safe-haven floor.

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