Home >Markets >Commodities >Gold prices drop to near lowest in one month, silver rates fall sharply

Gold dealers in India charged a premium of $2 an ounce over official domestic prices, unchanged from previous week, Reuters reported, saying that demand remained subdued despite a correction in gold rates. Dealers attributed the subdued demand to volatility in prices, which had dropped to near one-month low on Friday. Gold rates in India include 10.75% import duty and 3% GST. 

Oil and gold are two key imports into India, accounting for 27.3% and 6.5% of total imports, respectively, according to Morgan Stanley.

Gold futures on MCX settled 0.4% lower at 46,808 per 10 gram while silver dropped 0.9% to 63,599 per kg.  In India, the Gem & Jewellery Export Promotion Council's Bangalore exhibition kicks off next week. 

In global markets, gold edged lower to settle at $1,790 an ounce amid uncertainty over the US Federal Reserve's tapering timeline and a stronger US dollar. 

The dollar index edge up 0.2% to 92.642 while benchmark U.S. 10-year Treasury yield rose after a measure of US inflation edged higher. On Friday, data showed the producer price index for final demand, a key measure of inflation, increased more than expected last month. Among other precious metals, silver fell 0.9% to $23.86 per ounce, while platinum dropped 1.9% to $958.51 per ounce.

Though gold is considered a hedge against inflation, higher yields translate into higher opportunity cost for holding non-interest bearing bullion.

“Gold has corrected sharply from recent highs amid lack of fresh triggers to extend the momentum. While price is well off the highs, we do not expect a sustained decline as rising challenges to global economy may increase its safe haven appeal while US economic concerns may limit any major upside in the US dollar," Kotak Securities said in a recent note.

Analysts said that the elevated US producer price index data could on margin drive people to believe that the Fed could show slightly less accommodation down the road with tapering. Gold investors closely monitor the Fed's decisions, since non-yielding bullion tends to gain when interest rates are low. (With Agency Inputs)



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