Getty ImagesAsian shares tumbled on Tuesday after Wall Street hit a confirmed bear market milestone and bond yields struck a two-decade high on fears that aggressive US interest rate hikes would push the world's largest economy into recession.
Gold futures on MCX were trading lower, falling about 0.38 per cent or Rs 195 to Rs 50,469 per 10 grams. However, silver futures plunged 0.62 per cent or Rs 374 at Rs 59,937 per kg.
Amid prospects of aggressive monetary policy tightening, investors de-risking leaves the potential for gold prices to take another knock.
Bullion is often seen as an inflation hedge, but the opportunity cost of holding it is higher when the Fed raises short-term interest rates, as gold yields no interest.
It's a central bank-heavy week ahead, with the Fed expected to deliver its second straight half-point rate hike to bring inflation under control.
Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities said that gold remains pressurized by firmness in the US dollar index and bond yields amid increased talks of aggressive rate hikes by Fed.
"Amid other factors, gold ETF investors have also moved to sidelines after recent inflows," he added. "However, supporting price is inflation concerns, global growth worries and increased geopolitical tensions."
In the spot market, the highest purity gold was sold at Rs 51,435 per 10 grams while silver was priced at Rs 60,912 per kg on Monday, according to the Indian Bullion and Jewellers Association.
The spot prices of gold have gained over Rs 500 per 10 grams as compared to the previous session, whereas silver has remained below the Rs 61,000 mark for more than two sessions.
Pritam Patnaik, Head - Commodities, Axis Securities said that gold saw a sharp selloff, as it fell more than $50 on the day in response to rising yields and a strong US dollar.
"The heightened volatility and short rally that we witnessed in gold post the US inflation data was widely expected to fizzle out quickly, as the Fed’s reaction was logically a hawkish stance, which played out yesterday," he added.
Trading Strategy
"We expect gold prices to trade sideways to down for the day with COMEX Spot gold support at $1,810 and resistance at $1,840 per ounce. MCX Gold Aug support lies at Rs 50,300 and resistance at Rs 51,000 per 10 grams," said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
Global markets
Spot gold rose 0.4 per cent to $1,825.97 per ounce, as of 0247 GMT, after falling to its lowest since May 19 at $1,810.90 earlier in the session. US gold futures fell 0.2 per cent to $1,827.80.
Spot silver gained 0.5 per cent to $21.16 per ounce, platinum firmed 0.4 per cent to $936.77, and palladium rose 0.4 per cent to $1,804.17.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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