Gold Prices Today: Aggressive US Fed, strong dollar to pressure yellow metal

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Gold prices fell on Wednesday in international markets as the US dollar and Treasury yields rose after economic data bolstered expectations the Federal Reserve will continue on an aggressive rate-hike path. Spot gold was down 0.3% at $1,696.30 per ounce as of 0127 GMT.

At 9.41am, gold contracts were trading 0.52 percent lower on the Multi-Commodity Exchange (MCX) at Rs 50,020 per 10 grams and silver shed 0.72 percent at Rs 52,766 a kilogram.

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Better US economic data signals better health of the economy that supports benchmark Treasury yield which ramps up demand for the US Dollar. Precious metals gave away the day's gains as the US dollar index crossed the 110 mark yesterday. On the data front, US Service PMI stood at 56.9 versus 56.7 putting pressure on precious metal prices. Continuing upward move in the dollar, which moves opposite to gold prices, may put selling pressure on precious metals prices. Gold has resistance at Rs 50750 and support at Rs 50000. Silver has support at Rs 52700 and resistance at Rs 54400.

A surging dollar index and bond yields on the back of a greater probability of Fed hiking rates by 75 basis points has seriously dented gold prices. Encouraged by positive data flows emerging from the US economy, the Fed could easily execute its plans to rein in inflation. With the probability of a 75 basis point hike increasing to 72%, it’s not surprising to see the impact on gold.

The Dollar Index jumped 0.4% to 110.25, an over 20-year high, while the 10-year US treasury yields were also trading at their highest level in the last two months. The bullion pack will be under pressure till the Fed event.

Gold prices traded lower on Wednesday with spot gold prices at COMEX trading 0.30% down near $1697 per ounce in the morning trade. Gold prices fell below $1700 per ounce on stronger dollar and better than expected US economic data boosting expectations of aggressive rate hike from Fed. The dollar index surged above the 110 mark lowering demand for safe haven metals.

We expect gold prices to trade sideways to down for the day with COMEX spot gold support at $1676 and resistance at $1720 per ounce. MCX gold October support lies at Rs 49800 and resistance at Rs 50500 per 10 grams.