Bullion faces choppy week as dollar, US-Iran risks test sentiment: Analysts

Gold and silver are set for another bout of turbulence in the coming week, as movement in the US dollar and unresolved US-Iran tensions cloud the outlook, analysts said.

On the domestic front, investors will watch the Reserve Bank of India's monetary policy decision on Wednesday, with a 25 basis points rate hike expected.

Services PMI data from major economies, US trade figures and mid-month consumer sentiment data due later in the week will also provide cues to bullion prices. The unresolved US-Iran situation will add another layer of uncertainty for precious metals, they added.

On the Multi Commodity Exchange (MCX), gold futures for December delivery declined Rs 2,887, or 2 per cent, during the holiday-shortened week to end at Rs 1.5 lakh per 10 grams, while silver dropped Rs 8,819, or nearly 4 per cent, to Rs 2.25 lakh per kilogram.

"MCX gold remained under pressure last week, declining around 2 per cent as a stronger US dollar and rising bond yields intensified profit-booking across bullion and other asset classes," Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said.

Softer US employment data had initially supported gold by reducing expectations of aggressive monetary tightening by the Federal Reserve.

However, the support proved short-lived as investors turned to profit-booking towards the end of the week, he said.

In global markets, Comex gold futures for December delivery fell $158.9, or 3.7 per cent, to close at $4,162.3 per ounce, while silver dropped $4.38, or 6.7 per cent, to $60.41 per ounce.

"Gold ended yet another week with heavy losses, with prices falling more than 3.5 per cent on a weekly basis at around $4,160 per ounce, while silver ended with a loss of over 6.5 per cent, tracking a correction across industrial metals," said Pranav Mer, Senior Vice President, EBG - Commodity & Currency Research, JM Financial Services Ltd.

Broader weakness across commodities, a stronger dollar and elevated yields amid signs of further rate hikes by central banks also weighed on precious metals, he added.

Some of the war-risk premium in bullion eased after reports pointed to increased oil flows from West Asia. However, mixed signals over escalation kept investors from making aggressive bets, Mer said.

Trivedi said any further escalation could revive safe-haven demand for bullion, but the lack of a clear direction on the geopolitical front is likely to keep prices in a two-way movement.

A sustained rise in the dollar above 102 or a further rise in Treasury yields could exert pressure on gold, while a reversal in either could provide some relief to the yellow metal, he added.