Domestic gold and silver prices dropped on Thursday amid a strengthening dollar as investors awaited the US central bank's policy meeting for cues. Sharp gains in the Indian equity market, wherein the S&P BSE Sensex index crossed the 59,000 mark for the first time ever, also dented the precious metals' appeal as safe haven.

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Multi Commodity Exchange (MCX) gold futures for October delivery traded with a loss of Rs 239 or 0.5 percent at Rs 46,657 per 10 grams compared with their previous close of Rs 46,896 per 10 grams.

MCX Silver December futures were at Rs 62,805 per kilogram, down by Rs 488 or 0.8 percent compared with the previous close of Rs 63,293.

Sharp gains on Dalal Street led by banking stocks and heavyweights such as Reliance Industries, ICICI Bank and ITC pushed benchmark indices to record highs. The Nifty50 benchmark came within two points of the 17,600 level. Catch live market updates here

Globally, gold rates fell as a firmer dollar dented the yellow metal’s allure for holders of other currencies. Investors awaited the Federal Reserve’s meeting for guidance on its timeline for stimulus withdrawal and interest rate hikes. Spot gold and US gold futures were down half a percent at $1,785.4 per ounce and $1,786.1 per ounce respectively. Spot silver was down 1.1 percent at $23.6 an ounce.

Bullion is viewed as a hedge against the inflation and currency debasement likely from widespread stimulus. The US central bank’s tapering could tackle both those conditions, diminishing gold’s appeal.

The dollar index -- which gauges the greenback against six other currencies -- rose 0.2 percent to 92.7. The rupee appreciated marginally to 73.45 against the US dollar. At the current level, it is down half a percent against the US currency so far in 2021.

Ravindra Rao, CMT, EPAT, VP-Head Commodity Research at Kotak Securities, believes MCX gold futures are in a consolidation phase with the Rs 46,620-47,600 range yet to be breached decisively.

For Thursday's session, key resistance is placed at Rs 47,280, followed by 47,600, Rao said.

According to Sandeep Matta, Founder, TRADEIT Investment Advisor, spot gold has failed to hold the key physiological level of $1,800 an ounce, and remained in doldrums.

"Precious metals are likely to be rangebound until the conclusion of the FOMC meeting next week. Market participants are waiting for more clarity on the Federal Reserve’s timeline to begin tapering its massive stimulus and hoping that it does not begin until the November meeting," he said.

He sees Rs 46,900 as a key level for MCX gold futures. He suggests a buy zone above Rs 46,900 for a target of Rs 46,975-47,200 and a sell zone below Rs 47,900 for a target of 46,813-46,700.

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Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart, expects both precious metals to remain volatile in the near term.

On MCX, gold futures find support at Rs 46,750-46,600 and resistance at Rs 47,050-47,220. For silver, he has pegged support at Rs 62,900-62,500 and resistance at Rs 63,700-64,100 levels.

Jain recommends buying gold futures on dips to around Rs 46,800 for a target of Rs 47,200 with a stop loss at Rs 46,580.