Gold prices plunged to Rs 47,556 per 10 gram at the Mumbai retail market on broader selloff across assets class, firm dollar and rising bond yields; while MCX price fell near Rs 47,000/10 gram during the evening session.
The yellow metal breached the psychological $1,800/oz level after the US Central banks suggested that interest rates could be raised sooner than expected.
The rate of 10 gram 22-carat gold in Mumbai was Rs 43,561 plus 3 percent GST, while 24-carat 10 gram was Rs 47,556 plus GST. The 18-carat gold quoted at Rs 35,667 plus GST in the retail market.
Tapan Patel, Senior Analyst (Commodities), HDFC Securities said, “Gold prices extended decline in evening session ahead of US markets opening with COMEX spot gold losing more than 1% to $1,788 per ounce. MCX Gold August futures were trading 2.57% down at Rs 47,260 per 10 gram. Gold prices in India capped downside with sharp rupee depreciation as spot rupee ended down by more than 1% for the day.”
“Gold prices are witnessing selling on the stronger dollar on FED tapering signals. The hawkish stance has led investors outflow from a safe-haven asset with steady economic recovery”, Patel said.
US Fed kept its benchmark policy rate unchanged at zero to 0.25 percent and pledged to continue asset purchase at $120 billion monthly.
The projection for GDP and inflation was also increased by the Fed, amidst the recovery seen in the U.S. economy. Any further comments from Fed officials or any update on the trade war between the US-China will be in focus.
Market participants will also focus on the U.S. weekly jobless claims data scheduled later in the day.
The US dollar climbed to 91.75, up 0.60 percent against a basket of six rival currencies. A stronger greenback and rising bond yields increased the opportunity cost of holding the bullion metal which shifted the investors away from Gold.
Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund rose by 1.2 tonnes to 1,045.78 tonnes. The ETF has a market value of $62.55 billion.
Spot gold slightly fell $28.92 to $1,782.73 an ounce at 12:34 GMT in London trading.
MCX Bulldesk tanked by 450 points or 2.99 percent, at 14,618 at 18:05. The index tracks the real-time performance of MCX Gold and MCX Silver futures.
“Gold prices languished as the dollar and U.S. Treasury yields jumped after Federal Reserve officials projected interest rate hikes sooner than expected. The dollar index jumped to its highest level in two months; whereas, the U.S. 10Y yield rose from 1.48 to 1.59 after the Fed's policy statement. No changes have been announced in their monthly $120 bond purchase, although initial talks for pullback of the same has begun. Market participants are anticipating tapering comments from Fed in August or September, also the Fed governor raised bets for a tighter monetary policy after fed projection showed two rate hikes in 2023, hence weighing on the bullion.”, said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.
The broader range on COMEX could be between $1804 - 1840 and on the domestic front, prices could hover in the range of Rs 47,450- 47,950.
“COMEX gold trades about 4% lower near $1785/oz. Gold is pressurized by a sharp rise in the US dollar index and bond yields in reaction to Fed’s projection of early interest rate hikes. Gold ETF investors remained on the sidelines however supporting price is rising inflation concerns and uneven global economic recovery. Fed's stance is negative for gold however market reaction may subside as the central bank is not looking at any imminent measures”, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.
The gold/silver ratio currently stands at 68.40 to 1, which means 68.40 ounces of silver is required to buy an ounce of gold.
Silver prices crashed by Rs 1,873 to Rs 69,520 per kg against its closing price on June 16.
In the futures market, the gold rate touched an intraday high of Rs 48,250 and an intraday low of Rs 46,938 on the Multi-Commodity Exchange (MCX). For the August series, the yellow metal touched a low of Rs 44,501 and a high of Rs 49,721.
Gold futures for August delivery slides Rs 1,401, or 2.89 percent, to Rs 47,105 per 10 gram in evening trade on a business turnover of 11,359 lots. The same for October tumbled by Rs 1,371, or 2.81 percent, to Rs 47,441 on a business turnover of 3,258 lots.
The value of August and October’s contracts traded so far is Rs 3,723.03 crore and Rs 222.14 crore, respectively.
Similarly, Gold Mini contract for July slumped Rs 1,329, or 2.75 percent at Rs 46,950 on a business turnover of 18,113 lots.
Patel expects gold prices to trade down with COMEX gold support at $1760 and resistance at $1820 per ounce. MCX Gold August support lies at Rs. 46800 and resistance at Rs. 47800 per 10 gram.
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research LimitedTechnically, International gold is trading with bearish momentum near $1,785 levels and may continue to decline and test the support of $1,770-1,760 levels. On the domestic front, MCX August Gold has been sustaining below 50-SMA and the market declined more than 1400 points since the previous close. We may witness bearish momentum in the evening session where Rs 47,000 levels may be tested.