US Fed action, oil swings to test bullion as traders eye West Asia risks: analysts

Gold and silver are heading into a crucial week, with the Federal Reserve’s interest rate decision, oil price movements and the US-Iran conflict determining whether bullion will extend its recovery or come under renewed pressure, analysts said.

In addition to the Fed’s decision, investors will be watching US consumer confidence, core personal consumption expenditures (PCE) inflation data, weekly jobless claims and monetary policy announcements by the Bank of England and the Bank of Japan.

“Market sentiment will continue to be driven by developments in the US-Iran geopolitical situation, the direction of crude oil prices and its impact on inflation expectations ahead of the US Federal Reserve’s policy decision on July 29,” Jatin Trivedi said.

On the domestic front, gold futures for August delivery fell during the last week to Rs. 2,200 or 1.6 per cent to Rs. 1.43 lakh per 10 grams was closed.

Silver futures for September delivery on the Multi Commodity Exchange were at Rs. 5,735 or 2.7 percent to Rs. 2.22 lakh per kg.

Globally, Comex gold futures for August delivery rose USD 52, or 1.3 percent, to USD 4,070.8 an ounce, and silver futures for the September contract rose USD 3, or about 5 percent, to settle at USD 58.90 an ounce in New York.

Analysts said bullion saw sharp swings during the week after Brent crude briefly recovered the USD 100-per-barrel mark following Houthi attacks on Saudi-owned vessels, prompting fears of supply disruptions.

However, oil retreated later as investors booked profits, helping the precious metals recover over the weekend.

Gold and silver are likely to trade in a range as markets monitor developments around Iran, said Praveen Singh, head of commodities at Mir Asset Sharekhan.

He added that China’s central bank continued to hoard gold in May, bolstering official-sector demand as a key pillar of support for the yellow metal.

Traders also expect shipping activity through the Strait of Hormuz to remain focused, while Federal Reserve Chairman Kevin Warsh’s comments after the policy announcement will be closely scrutinized for clues on the future path of US interest rates and the path of bullion prices.