Gold and silver slide into oversold territory as markets brace for a December Fed hike

What happened

Friday was a heavy day for bullion. On the site's MCX-equivalent prices, gold closed near ₹1,38,600 per 10 g, about 3% lower on the day and roughly 8% lower over the month. Silver fell harder, closing near ₹1,79,820 per kg, about 6% lower on the day and close to 20% down over the month.

Both metals now sit below their 20, 50 and 200-day averages, and momentum readings (RSI) are below 30, the zone traders call oversold.

Why prices are falling

The main pressure is US interest rates. The US Federal Reserve held rates at 3.75–4% on 28 October, but two members voted for an immediate hike, and markets expect another hike at the 9 December meeting. US 10-year bond yields rose to around 5% after the meeting. When safe bonds pay this much, gold and silver, which pay no interest, become less attractive.

What could support prices

• Central banks are still buying gold. China added about 21 tonnes in September, its 23rd straight month of purchases.
• Indian festive and wedding-season demand usually supports local buying on dips.
• Deeply oversold markets tend to bounce, at least for a while.

What the numbers said on 31 October

Update, 1 November: after this note was written, the way the site works out its chances was changed, because a 6-year test showed the method used below did not hold up. The figures below are kept as published. For today's figures, see the outlook page.

Looking back to 2017, setups like today's recovered more often than a normal day did. After removing gold's long-term uptrend and allowing for the Fed backdrop, the outlook gives:

• Gold: about a 54% chance of being higher in a month. Short term, a bounce is likely; over 1–3 months it is too close to call.
• Silver: about a 69% chance of being higher in a month, and it leans higher over 1–3 months, though with roughly twice gold's swings.

What to watch next week

• Any change in expectations for the 9 December Fed meeting, especially after US jobs and inflation data.
• Whether gold can climb back above about ₹1,40,500. That would confirm the bounce. A fall below about ₹1,36,300 would point to more weakness.
• Silver's reaction to industrial demand news, since about half of silver is used in industry.