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In India, gold futures fell to six-month low 49,250 per 10 gram while silver contracts tumbled, tracking a weak global trend. In global markets, gold fell more than 1% to their lowest in two years as a combination of robust dollar and elevated US bond yields diminished the appeal of the precious metal. Spot gold was down 1.3% at $1,648.59 per ounce. Spot silver dropped 2.9% to $19.09 per ounce.

On Friday, MCX gold futures settled at 49399, down 1.2 %, while silver at 56275 per kg, down 3%. 

The dollar index jumped to a new two-decade high against its rivals, making gold less appealing for other currency holders. Benchmark 10-year US Treasury yields hit an 11-year peak, increasing the opportunity cost of holding non-interesting paying assets gold.  This week, a number of central banks including the US Federal Reserve and the Bank of England have raised interest rates this week to tame inflation, stoking concern of a global recession. 

Though gold is considered a safe investment during times of financial uncertainty, rising rates dull its appeal since it yields no interest. Analysts say that the base trend for gold remains negative owing to monetary tightening outlook but signs of correction in the US dollar could lent some support. Fresh shorts should be avoided at current levels, they suggest.  

“COMEX gold trades lower, weighed down by firmness in the US dollar and bond yields. The US 10-year yield has jumped to 2011 high in reaction to Fed’s aggressive monetary tightening stance however spread between 2-year and 10-year yield has narrowed. The US dollar is still near 2002 high. Gold has weathered the central bank decisions and managed to hold above recent lows indicating that dip buyers have emerged. However a sustained rise is unlikely until the US dollar corrects significantly," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

Analysts also say that China’s struggle with the virus spread has dented growth outlook as is evident from forecasts. And in India, a weaker rupee, which skidded beyond 81 per US dollar, has helped lend some support to the domestic prices. Domestic gold rates are determined by the rupee-dollar rate and import duty. (With Agency Inputs)

 

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