Gold prices in India have continued their downward trend, dropping by Rs 1,500 per 10 grams, as hawkish statements from the Federal Reserve and escalating oil prices fuel market expectations of an imminent interest rate hike.
Photograph: Neil Hall/Reuters
Key Points
- Gold prices in the national capital fell by Rs 1,500 to Rs 160,900 per 10 grams, marking the fourth consecutive session of decline.
- The decline is attributed to Federal Reserve Chair Kevin Warsh’s hawkish speech, which increased expectations of a September interest rate hike.
- Rising US Treasury yields and an elevated dollar further pressured precious metals, extending their recent correction.
- Increased oil prices following US-Iran military strikes are adding to inflation concerns, strengthening the case for tighter monetary policy.
- Globally, spot gold traded marginally lower at $4,448.56 per ounce, while silver gained nearly 1 per cent.
Gold prices fell for the fourth straight session, declining by Rs 1,500 to Rs 1,60,900 per 10 grams in the national capital on Monday as bearish global cues weighed on traders’ sentiment.
The yellow metal of 99.9 per cent purity closed at Rs 1,62,400 per 10 grams on Friday.
Factors Driving the Decline
Traders said the decline in domestic gold prices also reflected continued profit-booking after the yellow metal’s strong run in recent weeks, with traders trimming positions as the metal failed to sustain its earlier momentum.
However, silver remained steady at Rs 245,500 per kilogram (inclusive of all taxes), according to local traders.
“Gold prices remained under pressure after Federal Reserve Chair Kevin Warsh’s hawkish speech at the Jackson Hole Symposium increased expectations of an interest rate hike in September meeting,” Gaurav Garg, head of research at Lemonn Markets Desk, said.
Higher US Treasury yields and an an elevated dollar further weighed on precious metals, extending their recent correction, he added.
Global Market Trends
Globally, spot gold traded marginally lower at $4,448.56 per ounce. However, silver gained nearly 1 per cent to $66.97 per ounce.
The bullion market also took cues from rising oil prices after fresh US-Iran military strikes, with higher energy rates adding to inflation concerns and potentially strengthening the case for tighter monetary policy.
Spot gold is trading lower and hovering around $4,440 per ounce after the US and Iran exchanged strikes.
The fresh strikes pushed up oil prices, which has raised the possibility of an interest rate hike, Praveen Singh, head of commodities at Mirae Asset ShareKhan, said.
Impact of Fed’s Stance
The metal has already taken a hit globally on Friday, ending near 4,455 per ounce after Warsh cited elevated inflation and said underlying CPI and PCE trends were not encouraging.
Warsh also said that short-term interest rates could be effective in reining in inflation and that Fed officials have to act if inflation failed to fall soon.
The hawkish remarks lifted expectations of a rate hike and triggered further profit-booking in precious metals.
