NEW DELHI: Gold prices dropped on Monday despite weakness in the US dollar as traders weighed the impact of possible interest rate hikes by the US Federal Reserve later this month to combat the rising inflation.
The Fed officials on Friday ended their public comment period ahead of the US central bank’s September 20-21 policy meeting, with strong calls for another oversized rate increase to battle high inflation.
Gold futures on
were trading lower by 0.28 per cent or Rs 141 at Rs 50,388 per 10 grams. However, silver futures were trading flat, marginally up 0.02 per cent or Rs 11 at Rs 55,061 per kg.
The dollar index held close to a more than one-week low hit on Friday. A weaker dollar makes gold less expensive for buyers holding other currencies. Higher interest rates increase the opportunity cost of holding the non-yielding bullion.
Gold trades marginally lower as support from the weaker US dollar, China’s virus concerns and Europe’s energy crisis is countered by the monetary tightening stance of the Fed and other central banks, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research, Kotak Securities.
Physical gold demand in some Asian hubs remained firm last week as lower prices lured buyers, although an uptick in domestic rates restrained purchases in India.
In the spot market, the highest purity gold was sold at Rs 50,877 per 10 grams while silver was priced at Rs 54,700 per kg on Friday, according to the Indian Bullion and Jewellers Association.
The spot prices of gold have plunged more than Rs 1,200 per 10 grams since August 25, whereas silver has dropped about Rs 1,200 per kg in the same period under review.
Ravi Singh, Vice President and Head of Research, ShareIndia said gold may gain some strength after the US Treasury Secretary Janet Yellen commented that the US inflation reading for August is likely to show a decline in weaker gas prices.
“In addition, she stated that the US is reviewing tariffs on Chinese goods and some of the tariffs could be rolled back. These factors led to a fall in the dollar which will induce buying in gold prices,” he added.
Trading Strategy
“We expect gold prices to trade sideways to down for the day with COMEX Spot gold support at $1,700 and resistance at $1,730 per ounce. MCX Gold October support lies at Rs 50,200 and resistance at Rs 50,800 per 10 grams,” said Tapan Patel, Senior Analyst (Commodities),
Securities.
Global markets
Spot gold rose 0.1 per cent to $1,717.17 per ounce, as of 0057 GMT. US gold futures were flat at $1,728.70.
Spot silver gained 0.9 per cent to $18.94 per ounce, platinum slipped 0.3 per cent to $878.21 and palladium rose 0.2 per cent to $2,177.47.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)