Gold prices set to drop 1,000 rupees as international prices plunge

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Investment

oi-Sunil Fernandes

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Gold prices in Indian cities are expected to fall by 1,000 rupees per 10 grams at least on Saturday, as international prices fell 2.5% in trade. The MCX, which trades until 11pm, has seen gold prices drop to Rs 952. Jewelry associations across the country, which are inspired by MCX prices, are said to quote the same rates.

Gold in Indian cities was trading around Rs 44,600 to Rs 46,600 per 10 grams for 22 karats on Friday and therefore is expected to open lower on Saturday from those levels.

In global markets, gold fell to its lowest level in more than a month after a strong US jobs report boosted expectations that the Federal Reserve could start cutting back support economic sooner than expected.

Spot gold fell 2.3% to $ 1,763 an ounce after hitting its lowest level since June 30 at $ 1,757.

Strong US employment data pushes gold prices down

Hires in the United States increased for July at its fastest rate in nearly a year despite fears over the delta variant of Covid-19 and as companies grappled with a labor supply restricted work, the Labor Department reported.

The non-farm payroll increased by 943,000 for the month while the unemployment rate fell to 5.4%, according to the department’s Bureau of Labor Statistics. The payroll increase is the best since August 2020.

These good jobs data could now push the US Fed to begin a partial withdrawal from its easing program much sooner than expected.

Many analysts believe gold could now drop to around $ 1,700 an ounce. However, support could arise near these levels as the world is still inundated with liquidity which could lead to buying at lower levels.

“The Fed stressed that their decisions about when they will start to decline, as well as the normalization of interest rates, are directly related to the state of the economy. More so, they have adjusted their dual tenure which was to facilitate full employment and maintain a target inflation rate of 2% to focus on full employment while letting inflation rates soar Robust economy ”, says Amit Khare, AVP- Research Commodities, Ganganagar Commodities , Limited.

Meanwhile, gold sovereign bonds are now open for subscription.

According to Nish Bhatt, founder and CEO of Millwood Kane International – an investment advisory firm, the price of the fifth tranche of SGB is set at Rs 4,790 / g.
“Investing in non-physical gold, via digital or paper gold, is highly recommended because it offers high liquidity, no storage cost and is easier to sell than physical gold. The investment in SGBs carries an interest coupon payable semi-annually. Investing in SGB is a superior alternative to physical gold. Investments in non-physical gold will help the government maintain control over the currency and a larger budget deficit.

Gold prices have softened in recent weeks to a one-month low. In the last week alone, its value has dropped by almost 1000 rupees / 10g. The rise in yields on the US dollar and the Treasury following an earlier than expected tightening of Fed policy largely led to a weakening in gold prices. Gold prices nationally and internationally have traded in a narrow range in recent months. The latest variant of the virus, the pace of vaccination, unlocking and signs of tightening Fed policy will drive gold prices going forward, ”he said.


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