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Gold rates today in India near lowest in 6 months but silver prices gain

Despite the price decline, investor sentiment remained weak. Holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, are down to two-year lows of 30,799,131 ounces (HT)Premium
Despite the price decline, investor sentiment remained weak. Holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, are down to two-year lows of 30,799,131 ounces (HT)

  • In global markets, spot gold remained steady at $1676 per ounce. The US Fed at the conclusion of its two-day policy meeting on Wednesday, is widely expected to raise interest rates by 75 basis points (bps)

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Gold prices were in a tight range in India futures market as investors remained cautious ahead of Fed rate decision scheduled tomorrow. On MCX, gold futures hovered near six-month low of 49,374 per 10 gram while silver contracts rose 0.5% to 57,005 per kg.

In global markets, spot gold remained steady at $1676 per ounce. The US Fed at the conclusion of its two-day policy meeting on Wednesday, is widely expected to raise interest rates by 75 basis points (bps). Some analysts even see a 100 bps rate hike. Among other precious metals, spot silver edged lower to $19.50 per ounce in global markets. Platinum fell 0.1% to $918.51 and palladium was down 2.4% at $2,172.19.

“COMEX gold trades marginally higher above $1685/oz supported by pause in the US dollar and bond yields amid positioning ahead of central bank decisions. Fed’s 0.75% rate hike has been factored in and market players are now assessing possibility of a surprise move. While some believe there is a possibility of a bigger hike, we believe that the Fed may maintain the pace given signs of improvement in inflation situation. Amid reduced expectations of a surprise move by the Fed, gold and other commodities have edged up and could see some extended gains," Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

Firm US bond yields and a strong US dollar, stemming from expectations of jumbo-sized rate hikes from the Fed, has buffeted the yellow metal this month. Rising interest rates dampen gold's appeal as it increases the opportunity cost of holding non-yielding bullion. A firmer greenback makes bullion more expensive for other currency holders. 

Despite the price decline, investor sentiment remained weak. Holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, are down to two-year lows of 30,799,131 ounces.

“The Fed is still seen leading other central banks in rate hikes however the extreme positioning of other currencies against the US dollar can make them vulnerable to a pullback. The British pound has tested 1985 low against the US dollar while the Japanese yen has tested 1998 lows. Gold is also underpinned by global growth worries and increased geopolitical tensions. US-China tensions have risen following US President’s statement that the US would militarily defend Taiwan if China were to attack," Kotak Securities said in note. 

“ETF outflows however show that investors are still not interest in buying the metal despite lower prices. Gold has already corrected sharply in anticipation of a major move by the Fed and we are now seeing a relief gains as market players position for the event. While we may see some extended gains, the general bias is still on the downside unless we see a substantial correction in the US dollar," the brokerage added.

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