Gold Sinks to Seven-Week Low as Vedika Narvekar Sees Cautious Bias

Gold prices have plummeted to a seven-week low, with the metal currently trading at $4,111 an ounce. According to Vedika Narvekar, Research Analyst - Commodities &amp. Currencies at Anand Rathi Shares and Stock Brokers, the outlook for gold prices remains cautious.

The dominant factors of yields and Fed policy continue to exert significant influence, despite the recent slowdown in price losses.

Gold has experienced a significant decline over the past month, falling nearly 12% from its August highs. Treasury yields have been the primary headwind. With the 30-year bond touching its highest level since 2002 and the 10-year bond nearing its highest level since 2007.

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Persistent inflation concerns and a hawkish Fed have contributed to elevated borrowing costs, hindering gold's trajectory.

US inflation (PCE) is set to be released today, and the jobs report on Friday will influence the Fed's actions in October. Additionally, investors should monitor any developments related to Iran, oil supply news, and the ongoing trend of ETF buying.

Gold's technical levels are as follows: $4178/oz, $4,100 / $4,025, and $4,300 / $4,380 for the Spot and MCX Gold CMP, respectively. For Silver, the CMP is $61/oz, with technical levels at $59 / $57 and $63.50/ $65.50.

As China embarks on its Golden Week holiday, spanning October 1-7, the country's gold market is poised to enter its busiest period of the year. The festive period often drives a surge in jewellery purchases, providing some support to gold prices.

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Gold's trajectory is currently hanging in the balance as investors weigh the dual forces of soft payrolls and strong economic data. A lackluster jobs report could provide a welcome respite for gold. Meanwhile, a strong print could revive bets on interest rate hikes, pushing prices back towards the $4,110 low.

The $4,000 mark serves as a critical test point. Meanwhile, two key variables are poised to exert significant influence: an Iran breakthrough, which could revive the traditional safe-haven narrative, or a decline in ETF demand, which could exacerbate the selling pressure.

As of now, gold appears to be consolidating rather than making a decisive move, with China's seasonal buying pattern providing a modest boost at the start of October.