US midterm vote, jobs data put bullion's fragile sentiment to the test: Analysts

Gold and silver prices may extend their decline in the coming week as bearish momentum persists, with investors tracking geopolitical developments, the US midterm election outcome and key economic data for cues on the direction of precious metals, analysts said.

Manufacturing and services PMI data from major economies, eurozone inflation figures, and US unemployment and nonfarm payrolls data later in the week will also be in focus, they added.

"In the week ahead, all eyes will be on the US midterm election results on November 3, and President Donald Trump's actions after that," said Pranav Mer, Senior Vice President, EBG - Commodity & Currency Research, JM Financial Services Ltd.

Any escalation involving the US, Israel and Iran could sharply push up crude oil prices, while risk assets such as equities and commodities may face extended selling and liquidation, he said.

On the Multi Commodity Exchange (MCX), gold futures for December delivery fell Rs 3,539, or 2.5 per cent, during the past week to close at Rs 1.38 lakh per 10 grams, while silver futures declined Rs 16,587, or 8.5 per cent, to Rs 1.79 lakh per kg.

"Gold witnessed a sharp correction in the last week to end around Rs 1.38 lakh per 10 grams on the MCX," Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said.

He added that despite considerable volatility and a brief recovery during the initial sessions, selling pressure intensified towards the end of the week.

Gold has faced cumulative selling pressure of over 6 per cent in the last three weeks, pointing to persistent weakness in investor sentiment and a lack of sustained buying interest at higher levels, Trivedi said.

The weakness was also visible in overseas markets, where Comex gold futures for December delivery tumbled by USD 109, or nearly 3 per cent, to close the past week at USD 3,898.9 per ounce, while silver slumped USD 4.67, or nearly 9 per cent, to USD 49.27 per ounce.

"Gold futures sell-off extended on Friday, while selling in silver accelerated, tracking a dip in the precious metal and a corrective move on industrial metals. Both metals ended the week with heavy losses, with gold hitting a low of USD 3,870 and silver USD 48.7, down 3 and 9 per cent, respectively," Mer said.

He said bullion saw some liquidation on Friday following a sharp sell-off in global and US information technology stocks, possibly to meet margin calls.

"Crude prices have continued to trade firm with Brent crude rising above USD 114 and WTI crude close to USD 105 per barrel. Bullion and oil have seen a strong negative correlation over the 6 to 8 months," Mer added.

Trivedi said developments surrounding US election-related uncertainty and tensions between Washington and Tehran could trigger intermittent demand for precious metals, although the broader price direction would largely depend on macroeconomic factors.