Gold prices today extend fall, down ₹11,500 from record highs; silver slumps
- Gold has fallen to 10-month lows in Indian markets
- Higher bond yields increase the opportunity cost of holding gold, which pays no interest
Gold today extended its recent fall in Indian markets amid rising US bond yields. On MCX, gold futures fell 0.4% to 10-month low of ₹44,768 per 10 gram while silver slid 0.8% to ₹67,473 per kg. In the previous session, gold had dipped 1.2% or ₹600 per 10 gram while silver had slumped 1.6% or ₹1150 per kg. After strong gains in 2020, gold has been under pressure so far this year amid a rally in equity markets and rising US bond yields. Gold is down over ₹5,000 from the start of this year and ₹11,500 from August highs of ₹56,200.
In global markets, gold prices were flat today at $1,711 an ounce after hitting a nine-month low in the previous session. Higher US Treasury yields continued to weigh on the precious metal. Benchmark US Treasury yields hovered near near 1.5%, increasing the opportunity cost of holding gold, which pays no interest.
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Kshitij Purohit, Lead – International & Commodity at CapitalVia Advisor, said international gold has been moving in a marginally sideways to bearish trend. "It is trading below the major support levels of 1770.75-1760.65. For MCX gold, support levels are at 45000-44900."
ETF interest remained weak. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.4% to 1,082.38 tonnes on Wednesday.
Gold traders will look for clues on the outlook of the US central bank's monetary policy when Fed Chair Jerome Powell's speaks at a virtual summit later in the day. The progress on US stimulus package will also be on their radar. The US Senate has delayed the start of debate on a $1.9 trillion COVID-19 relief bill.
Among other precious metals, silver rose 0.4% to $26.18 an ounce, while palladium eased 0.3% at $2,347.52. Platinum shed 0.5% to $1,161.50.
"Weighing on gold price is general rise in US and global bond yields, improving economic outlook and weaker investor interest. Gold may continue to sway along with US dollar as market players try to assess whether US economy will recover faster than other economies or not while equity markets remain volatile on uncertainty about impact of higher bond yields and debate about sustainability of the rally," Kotak Securities said in a note.
"The general bias however remains on downside unless there is a major correction in US bond yields or concrete measures taken on US stimulus," the brokerage added.
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Back in India, the twelfth tranche of sovereign gold bonds of this fiscal is open for subscription. The issue price has been fixed at ₹4,662 per gram. Gold bonds are issued by the RBI on behalf of the government. Financial planners says gold bonds are one of the best ways of investing in gold for the long term.
Apart from the benefit of potential appreciation in gold prices, these bonds offer a fixed interest of 2.5% on the invested amount to investors. (With Agency Inputs)
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