Bullion watch: What will shape gold, silver prices? Fed bets, US jobs data in focus

Commodity markets are bracing for increased volatility as key economic data and geopolitical tensions come to the forefront in September, according to analysts. The week following the recent sharp decline in gold prices is expected to be particularly unstable, with traders closely monitoring US jobs data, inflation figures from the Eurozone and Germany, and the US non-farm payroll report.

Jateen Trivedi, a VP Research Analyst at LKP Securities, stated that market participants are trying to factor in the potential for a September Federal Reserve policy change. Gold futures on the MCX saw a significant drop of 3.8 percent last week, closing at Rs 1.56 lakh per 10 grams, while silver futures declined by 4 percent, settling at Rs 2.36 lakh per kilogram.

The decline in gold prices, which fell from Rs 1.63 lakh to Rs 1.56 lakh per 10 grams, represented a loss of more than Rs 6,000 from the weekly peak and a 3 percent negative weekly closing. Pranav Mer, Senior Vice President at JM Financial Services Ltd., noted that selling pressure intensified on Friday following comments from Federal Reserve Chair Kevin Warsh, who discussed inflation and monetary policy, leading to profit-taking in bullion markets.

In international markets, Comex gold futures for December delivery fell by USD 150.7, or 3.2 percent, to USD 4,680.6 per ounce, while silver futures declined by USD 2.56, or 3.64 percent, to USD 67.78 per ounce. Looking ahead, markets will be closely watching US labor-market indicators, such as non-farm payrolls, unemployment data, and ADP non-farm employment change, which could impact the Federal Reserve's decision-making ahead of its September meeting.

Geopolitical developments, particularly the US-Iran conflict and the situation at the Strait of Hormuz, could introduce additional uncertainty for traders. Despite the recent correction, silver outperformed gold in August, with a 21 percent gain compared to gold's 15.7 percent gain. Trivedi concluded that the interplay of dollar movements, labor-market data, Fed expectations, and geopolitical headlines will ultimately determine whether gold stabilizes after its recent correction or experiences further profit booking.