Gold prices today fall sharply, silver rates slump1 min read . Updated: 08 Jan 2021, 03:36 PM IST
- Sharp rise in US bond yields and strong US dollar weighed on gold price
- Higher bond yields increase the opportunity cost of holding the non-interest yielding gold
Gold and silver prices fell sharply today in Indian markets, tracking a decline in global rates. February gold futures on MCX fell 1.4% or ₹700 to ₹50,775 per 10 gram, in its second decline in three days. In the previous session, gold had jumped 0.85% after crashing nearly ₹1,200 per 10 gram on Tuesday. As compared to August highs of ₹56,200, gold rates are down about ₹6,000 per 10 gram. Silver futures today slumped ₹1,600 or 2.3% to ₹68,325 per kg.
In global markets, gold rates moved lower today amid a stronger US dollar and strong equity markets despite hopes for additional US fiscal stimulus under incoming President Joe Biden administration. Spot gold fell as much as 1.8% to below $1900 per ounce.
The US 10-year bond yield held above 1%, helping the dollar rebound to hit a near two-week peak against a basket of currencies. A stronger dollar makes gold more expensive for holders of other currencies, while higher bond yields increase the opportunity cost of holding the non-interest yielding gold.
Weighing on gold price is sharp rise in US bond yields, say analysts. "The US 10-year bond yield has crossed 1% reflecting improving outlook for US economy as well as expectations of higher inflation and interest rates. Also weighing on gold price is continuing progress on vaccine front," Kotak Securities said in a note.
On Thursday, President Donald Trump conceded that Biden will be the next US president, a day after his supporters stormed the U.S. Capitol.
ETF investors remained on the sidelines. Holdings of the world's largest gold-backed exchange-traded fund or ETF, SPDR Gold Trust, fell 0.4% to 1,182.11 tonnes on Thursday.
Gold traders now await US non-farm payrolls data due later in the day to gauge the jobs market's health.
Gold may witness choppy trade as market players counter stimulus measures against optimism about vaccine rollouts, Kotak said.
The general improvement in industrial demand outlook has lent support to silver prices but ETF outflows show waning investor buying interest at current levels, the brokerage added.