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Gold and silver prices extended their recent losses in Indian markets, tracking a sharp fall in global markets. On MCX, gold futures were down 0.4% at 50483 per 10 gram while silver fell 0.43% to 60,049 per kg. On Monday, gold had slumped 2% while silver 2.6%. In global markets, gold was near a four-week low of to $1,825.97 per ounce. A strong US dollar and liquidation of bullion to cover losses in other assets has put pressure on gold, say analysts.  

The dollar index was steady after hitting a two-decade high on Monday, and drawing most investors away from greenback-priced gold. Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

Gold saw a sharp selloff on Monday, as it fell more than $50 on the day in response to rising yields and a strong U.S. dollar. The precious metal is struggling, as investors are still digesting the US inflation numbers, published last week. The heightened volatility and short rally that we witnessed in gold post the US inflation data was widely expected to fizzle out quickly, as the Fed’s reaction was logically a hawkish stance, which played out yesterday," said Pritam Patnaik, Head - Commodities, HNI, and NRI Acquisitions, Axis Securities. 

“But with the supply chain bottlenecks expected to only continue, thanks to an extended lockdown in China, the inflationary trend is here to continue . It is widely expected that the Fed could adopt an aggressive stance to rein in the inflation, market is pricing in a 75 basis point increase . This will continue to exert pressure on gold prices," he added. 

Among other precious metals, spot silver gained was higher at $21.16 per ounce.

In a note Kotak Securities said “market uncertainty may remain high ahead of Fed decision later this week. Fed is largely expected to raise interest rate by 0.5% and this has been factored in. Market players may want more clarity if the central bank plans to fasten the pace of rate hikes to control rising price pressure. Market players may also look at economic projections to gauge impact of monetary tightening on economic activity."

"While Fed’s monetary tightening debate has unnerved market players, risk appetite got a hit also as China saw a fresh surge in virus cases which forced authorities to lock down certain regions for mass testing. China has maintained its zero tolerance policy and is resorting to restrictions to limit the virus spread and this has led to uncertainty that any economic recovery in China will remain challenged unless virus spread comes under total control.

 

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