NEW DELHI: Gold prices hovered near a more than one-month low on Thursday. The US central bank’s hawkish stance pushed the dollar higher against major currencies, putting pressure on gold. A spike in US Treasury yields also added to the yellow metal’s woes. Gold prices fell around 1.5 per cent in the domestic market.
The Fed on Wednesday began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases. Higher interest rates will dull gold’s appeal as they translate into a higher opportunity cost of holding it.
The dollar index jumped to its highest level in two months against its rivals, making gold more expensive for holders of other currencies. The benchmark 10-year yield rose to its highest level since June 4 at 1.594 per cent, increasing the opportunity cost of holding the non-interest bearing gold.
After the Fed’s meeting, gold and silver may trade lower and their safe haven demand is likely to fade out in the short run. This is likely to dent the sentiment further in the world’s second largest bullion market. Also, buying of bullion by exchange-traded funds (ETFs) is poised to fall down.
Gold futures on MCX tanked 1.46 per cent or Rs 706 to Rs 47,800 per 10 grams in morning deals. Silver futures declined 1.59 per cent or Rs 1,138 to Rs 70,330 per kg.
“COMEX gold trades about 2 per cent lower near $1823/oz and has tested the lowest level since early May. Gold is pressurized by sharp rise in US dollar index and bond yields in reaction to Fed’s projection of early interest rate hikes,” said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.
In the spot market, gold of highest purity was sold at Rs 48,397 and silver at Rs 71,390 on Wednesday, according to the Indian Bullion and Jewellers Association, a Mumbai-based industry body.
“Gold ETF investors remained on the sidelines however supporting price is rising inflation concerns and uneven global economic recovery. Fed’s stance is negative for gold, however the market reaction may subside as the central bank is not looking at any imminent measures.”
“We expect gold prices to trade sideways to down for the day with COMEX gold support at $1,810 and resistance at $1,840 per ounce. MCX gold Aug may witness gap down opening with support at Rs. 47200 and resistance at Rs. 48,000 per 10 gram,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
Following a drop of 2.5 per cent in the previous session to its lowest since May 6 at $1,803.79 per ounce, spot gold was up 0.2 per cent as of 0039 GMT in early Asian trade. US gold futures were down 2.4 per cent at $1,816.90 per ounce.
Silver gained 0.6 per cent to $27.14 per ounce, palladium eased 0.1 per cent to $2,794.16, while platinum rose 0.1 per cent to $1,123.50.