Gold prices today struggle again, down ₹11,500 from record highs, silver weak
- Analysts say that though gold rates have recovered from recent lows, a sustained rise may come if there is a substantial correction in US dollar and bond yields
Gold and silver prices in India struggled amid a similar trend in global markets as investors remained cautious ahead of the US Fed policy announcement. On MCX, gold futures were up 0.2% to ₹44,917 per 10 gram while silver was flat at ₹66,950 per kg. In the previous session, gold had dipped 0.2% while silver had declined 1.09%. In global markets, gold rates were flat ahead of the outcome of the US Federal Reserve's two-day meeting.
Spot gold was little changed at $1,730.82 per ounce, after prices rose to a two-week high of $1,740.90 in the last session. Other precious metals were also under pressure. Silver fell 0.7% to $25.77 while platinum slid 0.5% to $1,206.
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The US benchmark treasury yields hovered near their highest levels in over a year, putting pressure on the gold. Higher yields increase the opportunity cost of holding non-yielding assets like the yellow metal. Asian stocks markets were mostly lower today while the dollar was stronger versus most major peers.
"Gold traded steady as investors remained cautious ahead of the US policy meeting outcome scheduled later during the day. Meanwhile, a strong U.S dollar, higher bond yields and signs of a global economic recovery continued to hit the safe-haven demand of precious metals," says Hareesh V, Research Head Commodities at Geojit Financial Services.
"Prices are required to break the support of $1660 to continue the bearish outlook. Or else, there are chances of a recovery uptick in the counter," he added.
Analysts expect the Federal Open Market Committee to hold interest rates near zero and repeat a vow to keep buying bonds at the current $120 billion monthly pace. Later in the day. the panel will release a statement and its forecasts while Fed chief Jerome Powell will also hold a press briefing.
Analysts at Kotak Securities say that gold may continue to sway along with US dollar and bond yields in the near term unless there are fresh triggers. "Gold fell as low as low as $1673.3/ounce last week, the lowest since June 2020, as US dollar index jumped to November 2020 highs."
Though gold has recovered from recent lows, they say, a sustained rise may come only "once we see a substantial correction in US dollar and bond yields."
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Gold is seen as a hedge against higher inflation that could follow massive US stimulus measures. However, a rise in US treasury yields tends has dampened the appeal of the non-yielding commodity.
Though gold has managed to recover from recent lows, outflows from ETFs have continued. "ETF flows are usually highly price sensitive so unless we see sustained recovery in prices, we may not see much buying interest," Kotak said.
(With Agency Inputs)
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