Why are gold and silver trading volatile despite softer dollar

Gold prices edged lower in international markets on Monday (February 16), while silver traded volatile, as investors consolidated recent gains and awaited key US economic data for fresh cues on interest rates.In overseas trade, gold slipped 0.5% to around $5,014 per ounce after swinging sharply in recent weeks amid position unwinding. The metal had closed the previous week above the $5,000 an aounce mark on Comex, supported by safe-haven flows and a softer dollar.

Silver, which has seen two-way moves in recent sessions, also remained volatile.
In the domestic market, silver futures on the Multi Commodity Exchange (MCX) had declined ₹5,532, or 2.2%, last week, while gold rose ₹444, or 0.3%.Analysts said bullion prices are likely to remain range-bound in the near term, with volatility persisting as markets track upcoming US macroeconomic data, including fourth-quarter GDP numbers and the Personal Consumption Expenditures (PCE) inflation print.

Data from the US showed the economy is expected to grow at an annualised pace of 3% in the December quarter, slower than the previous quarter but still resilient. However, stronger-than-expected employment data has tempered expectations of early rate cuts by the Federal Reserve.

Market participants are now pricing in a higher probability of a rate cut by mid-year, with bond yields easing and the dollar index softening last week. A weaker dollar typically lends support to gold, which is priced in the US currency.“Gold and silver prices may continue to witness consolidative moves, but volatility will prevail with focus on incoming US GDP and PCE inflation numbers and commentary from Federal Reserve officials,” Pranav Mer, Vice President, EBG – Commodity & Currency Research at JM Financial Services, said.

Analysts added that central bank buying and safe-haven demand amid volatility in global equity markets continue to offer support to bullion. However, mixed physical demand from key markets such as India and China, along with ETF outflows, have capped further upside.

Silver, which draws support from both precious and industrial demand, has been pressured by weakness in industrial metals and risk-off sentiment in technology-heavy equities, analysts said.

Jewellers said elevated volatility in bullion prices is influencing consumer behaviour.

Namita Kothari, Founder of Akoirah by Augmont, said buyers are opting for design-led and diamond-forward pieces over purely metal-weight purchases, as they weigh price swings in gold and silver.

Analysts expect bullion to remain sensitive to global macro signals this week, particularly US inflation readings, Federal Open Market Committee minutes and commentary from policymakers, which could shape expectations around the timing and pace of interest rate cuts.