US Federal Reserve's earlier-than-expected signal on rate hikes have lifted US dollar, reducing the safe-haven appeal of gold
Gold rates are now down ₹9,000 from last year's record high levels
Gold and silver prices edged higher in Indian markets after a steep fall in the previous session. Gold futures on MCX were up 0.33% to ₹47,112 per 10 gram, following a ₹1,500 plunge in the previous session. Silver futures were up 1% to ₹68,330 per kg after a ₹3,800 fall on Thursday. Prices of precious metals, including gold and silver, took a big knock after the US Federal Reserve's earlier-than-expected signal on rate hikes lifted US dollar.
MCX gold faces resistance at ₹48,150 while support is seen at ₹47,050, say analysts.
In global markets, spot gold rates were up 0.6% at $1,784.16 per ounce, having fallen nearly 5% so far this week. Silver rose 1.1% to $26.12 per ounce but it remains down 6% for the week.
Fed's meeting also showed the central bank is likely to start raising interest rates sooner than its prior guidance suggested, with two hikes projected by the end of 2023. Fed chief Jerome Powell also said that the central bank could also begin a discussion about scaling back bond purchases or stimulus programme that helped support various asset prices.
Following hawkish comments from Fed officials, the dollar jumped to a two-month high and was on track for its best week in nearly nine months.
Gold is considered as a hedge against inflation, but higher interest rates mean a higher opportunity cost of holding the asset that pays no interest.
"Initial bias likely for a slight recovery but the momentum unlikely to extend above $1835. At the same time, a direct drop below $1755 would trigger further liquidation pressure in the counter," said domestic brokerage Geojit.
ETFs also saw outflows following Fed's message. The holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.4% to 1,041.99 tonnes on Thursday.
"On Thursday, we noticed that gold prices corrected sharply on the back of optimistic Fed view on US economy and expectation of hike interest rates two times by year 2023. This impacted on dollar and bond yield increase sharply." said Anuj Gupta, Vice President - Commodity & Currency Trade at IIFL Securities.
In the short term, gold may remain weak but depreciation in rupee and higher inflation may curb the sharp fall in gold, he added.
Short term traders can go "for sell in gold at ₹47200 with the stoploss of ₹47,550 for the target of 4Rs 6500 levels. Prices are also correcting in physical market as there is no marriage and festival demand. We are advising to the people to wait for lower level to buy."
(With Agency Inputs)
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