NEW DELHI: Gold prices dropped sharply on Wednesday to weekly lows following strength in US dollar and treasury yields, which dented bullion demand. On Tuesday, prices of the yellow metal fell up to 1.8 per cent as a stronger dollar and rising Treasury yields overshadowed inflows into bullion.
Gold futures on MCX dropped 0.56 per cent, or Rs 256, down at Rs 52,453 per 10 gram. Silver futures were also trading lower by 0.64 per cent or Rs 438 at Rs 68,332 per kg.
Gold is highly sensitive to rising US interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion.
Pritam Patnaik, Head – Commodities, Axis Securities, said it is widely expected that Fed will raise interest rates by 50 basis points. This has ensured further pressure on gold prices.
“The fundamentals are still supportive of a gold bull run in the long term,” he added. “Factors like stubborn inflation, the onset of stagflation, geopolitical uncertainties, and slow growth will be supportive of gold prices.”
In the spot market, highest purity gold was sold at Rs 53,499 per 10 gram while silver was priced at Rs 70,344 per kg on Tuesday, according to the Indian Bullion and Jewellers Association.
The spot prices of gold has surged more than Rs 1,550 per 10 gram in the last one week, whereas silver has advanced about Rs 2,700 per kg in the same period of review.
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Trading strategy
Gold has support at $1938-1922, while resistance at $1,962-1,972. Silver has support at $24.78- 24.55, while resistance is at $25.30-25.48, said Rahul Kalantri, VP Commodities, Mehta Equities.
“In rupee terms, gold has support at Rs 52,420–52,250, while resistance is at Rs 52,950–53,110. Silver has support at Rs 68,210- 67,770 while resistance is at Rs 68,980–69,350,” he added.
Gold prices may see some profit booking this week in hope of de-escalation of tensions between Russia and Ukraine. The rising US treasury yields and stronger dollar is supporting the downside move in gold, said Ravi Singh, Vice President and Head of Research, ShareIndia.
Global markets
Spot gold was down 0.3 per cent at $1,944.77 per ounce, as of 0206 GMT, after hitting its lowest since April 11. US gold futures fell 0.6 per cent to $1,947.70.
Spot silver dipped 0.6 per cent to $25.00 per ounce, and platinum eased 1.3 per cent to $977.93, while palladium gained 0.4 per cent to $2,380.29.