Home / Markets / Commodities /  Gold prices in India today fall to lowest in over a month, silver rates tumble

Gold and silver fell sharply in India today after Fed chairman last week indicated high interest rates will continue for some time to curb inflation. On MCX, gold futures fell to one-month low when they dived 0.5% to 50,970 per 10 gram. Silver futures tumbled 1.3$ to 54063 per kg. On Friday, the yellow metal had tumbled nearly 500 in tandem with a fall in international rates.

In global markets, spot gold rates fell further today amid a strong US dollar. Spot gold fell 0.3% to $1,732.17 per ounce as the dollar index rose to near two-decade high of 109.29. A stronger greenback makes bullion more expensive for those holding other currencies. Among other precious metals, spot silver fell 1% to $18.69 per ounce while platinum slipped 1% to $855.27. 

Ravindra Rao, VP- Head Commodity Research at Kotak Securities, said: “COMEX gold trades modestly lower near $1740/oz weighed down by firmness in the US dollar and bond yields following hawkish comments from Fed Chairman Jerome Powell. Fed Chairman reaffirmed the need for continuing with rate hikes to get inflation under control which was largely expected but still we saw severe market reaction. The US dollar gains are also challenged by hawkish comments from ECB officials. While market reaction seems little over exaggerated, gold prices may remain under pressure until US dollar and bond yields remain higher."

The US central bank has already hiked its key overnight interest rate four times this year to control the worst inflation in decades. Higher interest rates increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

“Fed Chairman at the Jackson Hole symposium mentioned that higher inflation is likely to bring some pain to household and businesses. He added that US economy would continue to show strong underlying momentum and also pledged that the central bank will “use our tools forcefully" to attack inflation. On interest rates the Fed will be dependent on the incoming economic data," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

"Inflation continues to be the major concern for the Fed but in the process it could slower growth going ahead. Equities fell sharply while US dollar and 10 year yields rose in expectation of further tightening announcement by the Fed. Overall commentary is hawkish but Fed will be data dependent. Dollar will continue to get support at lower levels," he added.

In India, dealers last week were offering a discount of up to $7 an ounce on official domestic gold prices, up from the last week's discount of $4. Gold rates in India include 15% import and 3% GST. (With Agency Inputs)

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