Gold, silver decline up to 2% on hawkish Fed signals ahead of festive buying

New Delhi: Gold and silver traded up to 2 per cent lower on Friday amid rising expectations of a further rate hike by the US Federal Reserve.

On the Multi Commodity Exchange (MCX), precious metals fell sharply with the white metal losing over Rs 4,000 per kg during the session.

Gold futures (December) fell as much as 0.63 per cent or Rs 911 to hit an intraday low of Rs 1,41,685 per 10 grams. At around 12:20 pm, the yellow metal was trading at Rs 1,41,800, down Rs 796 or 0.56 per cent from its previous close.

Meanwhile, silver witnessed steeper losses, dropping Rs 4,282 or 2.26 per cent to touch an intraday low of Rs 1,85,171 per kg. At last count, the white metal was at Rs 1,85,500, down Rs 3,953 or about 2 per cent.

The sharp correction comes at a time when consumers are gearing up for Dhanteras and Diwali purchases, offering some relief to festive buyers.

In the international market, spot gold slipped 0.7 per cent to around $3,991 per ounce, while spot silver declined 1.6 per cent to $51.27 per ounce.

According to market experts, precious metals remain under pressure following a hawkish pause by the Federal Reserve.

The US central bank kept interest rates unchanged at 3.75-4 per cent in a 10-2 vote, with policymakers continuing to express concerns over elevated inflation.

Fed Chair Kevin Warsh indicated inflation remains stubbornly high, while two policymakers reportedly dissented in favour of a rate hike.

Since the announcement, a series of strong economic indicators have reinforced expectations that borrowing costs could remain higher for longer.

"Gold is currently approaching a crucial support zone between Rs 1.40 lakh and Rs 1.41 lakh per 10 grams. A decisive break below this range could drag prices towards Rs 1.37-1.38 lakh," commodity experts said.

For silver, the next major support is seen in the Rs 1.83-1.85 lakh per kg range. Silver has now corrected significantly from its historic peak, they added.

Despite the ongoing weakness, analysts believe current levels may be attractive for long-term investors and festive buyers. However, they cautioned that the near-term direction will depend largely on the Fed's policy outlook, the US dollar index, Treasury yields and crude oil prices.

Crude oil prices are also in focus amid rising geopolitical tensions in West Asia, developments involving Iran and concerns over potential supply disruptions.