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Inflation fears, weak dollar boost gold, silver prices

Inflation fears, weak dollar boost gold, silver prices

25 May 2021

(This story originally appeared in on May 25, 2021)

MUMBAI: Inflation fears globally have been driving up gold and silver prices with both at four-month highs now. In India too the prices of these precious metals are on a northward rally with silver again trading above the Rs 70,000/kg mark and gold nearing the Rs 49,000/10gm level.

Market players say with the US market surely rising to the threat of future inflation, the prices of these two precious metals could witness another strong rally this year. The weakness of the US dollar in recent weeks also added to the bullishness in gold.

According to some analysts, the massive volatility in cryptocurrencies in recent times and the overhang of fears about the spread of Covid infections in several parts of Asia is further increasing the bullishness about both gold and silver.

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In the international market, gold prices have gained 6 per cent in the last one month, while for silver the corresponding number is 7 per cent to $27.7. Last year, gold had gained 85 per cent while silver rose 28 per cent. In the domestic market, gold futures for June delivery were trading at Rs 48,580, up 2.2 per cent, while silver for May delivery was at Rs 71,880, up 4.7 per cent on the month. In India, trading in the physical gold market has been hampered by the Covid-induced lockdowns.

According to

VP (commodities research) Navneet Damani, gold steadied near the highest level in more than four months amid weaker dollar and a pullback in US yields showing investors’ increased optimism on the precious metal. “The dollar stood near its lowest levels in three months and the US 10-year yield was hovering near a week low,” Damani wrote in a note on gold. “Broader range on Comex (a division of the Chicago Mercantile Exchange) could be between $1,865 and $1,900 and on the domestic front (the price) could hover in the range of Rs 48,400-48,900.”
In addition to buying precious metals in physical form, investors are also investing through exchange-traded funds (ETFs). According to a recent report, total holding of the SPDR gold-ETF rose 0.6 per cent on Friday to 1,043 tonne. In India, the government opened subscription for the second tranche of sovereign gold bonds with the price fixed at Rs 4,842 per gram. After this May 2021 tranche, the government will issue five more before the end of September 2021, the RBI said.