Gold prices today see a big fall, silver rates tumble

In global markets, spot gold prices fell 1.1% to $1,705.94 per ounce. The US Labor Department's consumer price index (CPI) report showed monthly CPI gained 0.1% in August from July, against expectation of a 0.1% dip. Excluding the volatile food and energy components, core CPI increased to 6.3% from 5.9% in July.

The US bond yields firmed up after US inflation data. The dollar index rose 1%, making gold more expensive for overseas buyers. Although gold is considered a hedge against inflation, rising U.S. rates increase the opportunity cost of holding bullion.

Gold is an international commodity, and it is priced in US dollars. So, the price movement of the yellow metal is closely linked to the greenback. A strong dollar makes gold cheaper and vice versa (expensive), so leads to a reduction in prices

Analysts now expect a 75-basis-point rate hike by the Fed at its September 20-21 meeting. 

Wall Street extended losses and Treasury yields spiked higher across the board after hotter-than-expected inflation data fueled bets on jumbo rate hikes by the Federal Reserve next week.

A broad-based selloff gripped equities, with S&P 500 falling more the 3% and the-heavy Nasdaq 100 sinking more than 4% as yield-sensitive stocks took the biggest hit.

Emkay Wealth Management Ltd in a recent note said that gold may test levels of $1680 and $1630 in near-term, weighed down by the hawkish stance by Fed, strengthening of Dollar index. 

"$1700 is a crucial support level for the yellow metal. The last time the price of Gold was at this level there was a sharp bounce back which took it beyond the $1860 level. A close look at the 5 -year gold chart shows the high as $2070 and the low as $1176.

“The probability of gold breaking the support levels is higher because the resistance levels have been tested a couple of times in the last two months without any success as such. Therefore, a test of $1680 and $1630 on the downside cannot be ruled out, though it may not be able to advance much lower because a move downwards takes it closer to the cost of production," it said. (With Agency Inputs)