The Fed at its December meeting is still expected to raise rates by half a percentage point, a view endorsed by other Fed officials as well recently.
After months of decline, bullion prices shot up on bets that US rate hikes will slow, but analysts said institutional investors are wary and further gains could be elusive.
Gold futures on
were trading marginally lower, down 0.11% or Rs 58 at Rs 52,530 per 10 grams. Similarly, silver futures plunged 0.59% or Rs 359 at Rs 60,516 per kg.
Gold is seen as a hedge against inflation, which rising rates aim to tackle, thereby diminishing the metal’s appeal. Higher interest rates also make other assets more attractive compared with non-interest-bearing bullion.
Gold prices dropped amid strong dollar and a surge in US treasury yields. US Federal Reserve official’s hawkish statement added to downside pressure, said ICICIDirect Research.
They indicated that more rate hikes are needed to combat soaring inflation, it added. “Gold prices are expected to trade with a negative bias for the day on the back of a strong dollar and a rise in US treasury yields.”
Investors also kept a close tab on the economic fallout from fresh COVID-19 restrictions in China. Chinese physical gold premiums fell sharply last week as buying slowed.
Physical gold dealers in India were forced to offer the biggest discounts in four months last week as a jump in domestic prices hit demand, while Chinese premiums fell sharply as buying slowed.
In the spot market, the highest purity gold was sold at Rs 52,953 per 10 grams while silver was priced at Rs 61,320 per kg on Thursday, according to the Indian Bullion and Jewellers Association.
The spot prices of gold have jumped about Rs 2,500 in the last two weeks, whereas spot prices of silver have rallied about Rs 2,600 per kg during the same period under review.
NS Ramaswamy, Head of Commodities,
Securities said traders awaited further cues on central banks’ interest rate strategy.
“Asian share markets turned hesitant as investors fretted about the economic fallout from fresh COVID-19 restrictions in China, while bonds and the dollar braced for more updates on US monetary policy,” he added.
“Bullion overall charts are looking positive. Momentum indicator RSI also indicates the same,” said Amit Khare, AVP- Research Commodities, Ganganagar Commodity. He advised traders to take fresh buy positions in gold and silver.
He suggested buying gold and silver near given support levels at Rs 52,500-52,100 and Rs 60,500-60,000, respectively. He also advised profit booking near resistance levels at Rs 52,750-53,000 and Rs 61,200 and Rs 61,800, respectively.
Spot gold fell 0.3% to $1,744.38 per ounce by 0217 GMT. US gold futures shed 0.5% to $1,746.30. Bullion fell 1.2% in the week ending Nov. 18, its worst since the one ending October 14.
Elsewhere, spot silver fell 0.8% to $20.74 per ounce, platinum slipped 0.9% to $968.62, and palladium shed 0.7% to $1,924.34.
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