Since the Federal Reserve raised interest rates and tensions in the Middle East have risen, crude oil prices have crossed $100 a barrel. Since then the prices of gold and silver have seen significant fluctuations. Experts say that this fluctuation is expected to continue in the coming days. The biggest reasons are US data, tensions in West Asia and crude oil prices. The effect of which can be seen on both gold and silver.

If experts are to be believed, US economic data will come out next week, along with inflation figures. On the other hand, the manufacturing PMI, comments from Federal Reserve officials and the US non-farm payrolls report will also be released. The effect of all this will be seen on the prices of gold and silver in the international market.

Geopolitical uncertainty, particularly US-Iran tensions, will continue to play its role. US President Donald Trump has rejected Tehran’s offer to reopen the Strait of Hormuz within a week in exchange for lifting the naval blockade and opening nuclear talks. Commodity markets will be closed on Friday due to Mahatma Gandhi Jayanti.

Gold 2.5% and silver 3% cheaper

Jatin Trivedi, Commodity and Currency Research Analyst VP at LKP Securities, said the market outlook remains cautious and volatility is likely to remain high. Markets will be eyeing upcoming US non-farm payrolls and unemployment data. This data will be important in determining expectations regarding the Federal Reserve’s October policy decision. On the Multi Commodity Exchange (MCX), gold futures for October delivery last week traded at Rs. 3,500 or about 2.3 percent down to Rs. 1.5 lakh per 10 grams was closed. Silver futures Rs. 6,907 or a decline of 3 percent to Rs. 2.34 lakh per kilogram remained. Trivedi said that there was a lot of fluctuation in gold prices last week. It is Rs. 1.5-1.54 lakh per 10 grams traded in the range and closed over 2 percent lower.

Dollar pressure is visible on gold and silver

A continuation of the dollar index above 101 could put pressure on gold, as a stronger dollar reduces demand for dollar-denominated bullion. In the global market, Comex gold futures for December delivery fell $103.7, or 2.34 percent, to $4,321.2 an ounce last week. Silver fell $2.35, or 3.5%, to $64.80 an ounce in New York. Pranav Mere, Senior Vice President, EBG – Commodity and Currency Research, JM Financial Services Ltd said that gold futures traded in a range for most of the trading session last week, but overall they remained under selling pressure and international prices closed around $4,300 an ounce. He said silver futures also saw a weekly decline due to consolidation and correction in industrial metals along with gold.

These are also important factors

The pressure is not just due to currency. US 10-year Treasury yields hit their highest level since 2007, while 30-year yields are near 2004 highs. Higher long-term yields are underpinning demand for assets such as gold and silver, even as tensions remain in West Asia and between Russia and Ukraine.

The oil market is another important factor. Mayer said Russia and Ukraine are targeting energy infrastructure, but higher supplies from Saudi Arabia and Iraq have improved availability this month and pressured crude prices.

Trivedi said the next big test for gold will be the US jobs report. Stronger data could bolster expectations of interest rate hikes and put pressure on prices, while weaker employment data could temper those expectations and a weaker dollar could support bullion.