NEW DELHI: Gold prices were trading flat on Wednesday, hovering near their lowest levels since April 2022 as investors prepared for the likelihood of another super-sized interest rate hike from the US Fed in its effort to tackle inflation.
The dollar index hovered close to a two-decade high marked earlier this month, while the benchmark 10-year Treasury yield held close to an over 11-year peak scaled on Tuesday.
Gold futures on
were trading flat, almost unchanged, up by 0.03 per cent or Rs 16 at Rs 49,191 per 10 grams. However, silver futures were gained decently by 0.45 per cent or Rs 251 at Rs 56,594 per kg.
Gold is considered an inflation hedge but rising interest rates increase the opportunity cost of holding the non-yielding asset and bolsters the dollar, in which the bullion is priced.
Pritam Patnaik, Head – Commodities, Axis Securities said the prospects of an aggressive rate hike and expectations of continued hawkish policy stance going forward, have spooked the gold traders.
“Coupled with this, the dollar index trading close to its recent highs and buoyant bond yields, bullion prices have come under further price pressure,” he added.
Physical gold demand picked up in India as domestic prices fell ahead of key festivals, while premiums in China climbed further as its currency weakened.
In the spot market, the highest purity gold was sold at Rs 49,368 per 10 grams while silver was priced at Rs 56,354 per kg on Tuesday, according to the Indian Bullion and Jewellers Association.
The spot prices of gold have plunged more than Rs 1,300 per 10 grams in the last one week, whereas silver has dropped more than Rs 900 per kg during the same period under review.
The 75 bps rate hike by Fed is already discounted by the market, however, anything bigger will be more downside for gold, said Ravi Singh, Vice President and Head of Research, ShareIndia
“The stronger dollar and US treasury yield are continuously putting pressure on gold prices. Gold may trade in a tight zone ahead of the Fed meeting outcome,” he added.
Trading Strategy
“We expect gold prices to trade sideways to down for the day with COMEX Spot gold support at $1,640 and resistance at $1,680 per ounce. MCX Gold October support lies at Rs 48,800 and resistance at Rs 49,700 per 10 grams,” said Tapan Patel, Senior Analyst (Commodities),
Securities.
Global markets
Spot gold was flat at $1,663.68 per ounce, as of 0324 GMT. Earlier in the day, bullion hovered close to a two and a half year low touched last week. US gold futures were also trading flat at $1,671.90.
Spot silver edged 0.2 per cent lower to $19.28 per ounce, platinum rose 0.3 per cent to $925.31 and palladium fell 1.1 per cent to $2,144.91.
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