Gold prices declined in Indian markets for second day despite positive global cues. On MCX, gold futures were down 0.1% to ₹46,762 per 10 gram while silver rose 0.21% to ₹69,490 per kg. In the previous session, gold had inched 0.22% lower while silver fell 1.5%. Gold has been under pressure this year on fears that prospects of a faster economic recovery will ignite inflation and lead to rising lending rates, especially in the US, where Congress is moving forward on a $1.9 billion stimulus plan. In August, gold had hit a record high of ₹56,200 and has been under pressure since then.
In global markets, gold inched higher today after US Federal Reserve Chair Jerome Powell has reiterated that the central bank would keep monetary policy accommodative as the economy still needed support. Powell in his testimony before the US Senate Banking Committee tamped down inflation worries, saying that aid that while inflation could become volatile this year as spending recovers from the pandemic collapse, those price increases are unlikely to be large or persistent. Spot gold rose 0.2% to $1,809.17 per ounce.
Among other precious metals, silver rose 0.4% to $27.73 an ounce. Platinum climbed 1.4% to $1,253.76, while palladium added 0.4% to $2,360.69.
"Recovery upticks in gold may continue while it hold the stiff support of $1,760. Anyhow, major resistance is placed at $1,870. An unexpected drop below $1,755 would be an early signal of major selling pressure. MCX gold has resistance at ₹47,450 while has support at ₹45,300," Geojit said.
US bond yields fell after Powell's testimony. Easy monetary policy tends to weigh on government bond yields, increasing the appeal of non-yielding gold. The US dollar eased against rivals, making gold cheaper for holders of other currencies.
However, analysts are looking at the progress of the stimulus bill to assess whether any dip in yields could be a temporary issue.
"The biggest factor weighing on gold price is higher US and global bond yields. Gold yields no interest hence higher returns from bonds is negative for prices. Rising yields reflect increasing optimism about health of US economy amid vaccination progress and hopes of additional US stimulus. Higher yields however also reflect increased inflation and interest rate hike expectations. The recent inflation data from major economies also points towards increasing price pressure. Rising commodity prices has also added to inflation expectations. While higher yields has pressurized gold, the metal is also considered a hedge against inflation," Kotak Securities said in a note.
Meanwhile, gold ETFs continued to suffer outflows. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.4% to 1,110.44 tonnes on Tuesday from 1,115.4 tonnes on Monday. (With Agency Inputs)
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