Gold rates had hit a two-month high previous week and later corrected for five days in a row
Strong equity markets could cap gold's rise in near term, say analysts
Gold extended its losses to the sixth day day when futures on MCX were down 0.4% to ₹46909 per 10 gram. Silver futures rose 0.6% to ₹69,450 per kg but were off day's highs. In the previous session, gold had declined 0.42% while silver had slumped 1.75%. Last week gold rates in India had risen to two-month high of ₹48,400 and have corrected thereafter following decline in international prices.
After strong gains last year during which gold had hit a new high of ₹56,200, the precious metal has struggled this year amid rising US bond yields and optimism about economic recovery as vaccinations gain pace.
In international markets, gold rates failed to hold on to early gains and were down 0.3% to $1,777 per ounce. US Treasury yields rose and the dollar firmed, while investors awaited US GDP data due later today.
"Gold gained momentum after the US Fed’s pledge for an accommodative fiscal policy stance in yesterday’s policy meeting. Concerns over the economic impact of the second wave of corona pandemic and a softer US dollar also benefited the yellow metal. Meanwhile, a steady equity market and signs of economic recovery in the US and China may dent major gains in the commodity," said Hareesh V, Research Head Commodities at Geojit Financial Services.
"Prices will continue with mild positive bias as long as $1760 hold the downside. Anyhow, major rallies are expected only if it breaks the next upside obstacle of $1820. A close below $1720 is a sign of immediate trend reversal."
Gold tends to benefit from widespread stimulus measures from central banks because it is viewed as a hedge against inflation. Overnight, the Fed said it will continue with asset purchases and described inflation pressures as likely “transitory."
On the other hand, gold's rise could be capped due to weaker investor interest and concerns about Indian demand amid higher price and virus related restrictions, say analysts.
Overnight, US President Joe Biden, in his first speech to Congress, said laid out a sweeping $1.8 trillion package for families and education.