Gold price falls as dollar strengthens on Fed comments; silver follows

NEW DELHI: Gold and silver futures fell in Friday’s trade, tracking global gold prices that fell to a nine-month low, after The US Fed Chair Jerome Powell failed to soothe the bond market, pushing the dollar higher.

Gold futures for April delivery fell 0.3 per cent to Rs 44,500 per 10 grams. Silver futures for May delivery were trading at Rs 65,523 per kg, down 0.60 per cent.

Globally, spot gold eased 0.2 per cent to $ 1,693.79 per ounce, having earlier dropped to its lowest since June 8 at $ 1,688.96. It was down 2.3 per cent for the week so far.

“Gold remains pressurised by firmness in the US dollar on the back of higher bond yields, optimism about the US economy and safe haven buying. Also weighing on gold price is continuing ETF outflows. However, supporting price is progress on US stimulus and loose monetary policy stance of major central banks. Gold may remain under pressure unless US bond yields are correct or we see concrete measures on US stimulus,” said Ravindra Rao of Kotak Securities.

Hitesh Jain, Lead Analyst – Institutional Equities at Yes Securities said that even as gold prices have tumbled recently in the wake of rising sovereign yields, he does not think yields will sustainably rise, given the fact that governments do not favour higher yields on their accumulated gigantic debt.

“There is a prevalent divide between markets and central banks, wherein markets are pricing higher inflation and growth, while central banks remain accommodative and dovish. We assume that central banks will eventually rein in the yields with their asset purchases and also help their respective governments in keeping the borrowing costs low,” he said.

Jain said he is bullish on gold, considering the unprecedented government stimulus, bloated central bank balance sheets and burgeoning sovereign debt.

“This is tantamount to debasement of currencies like the greenback. A structural decline in dollar against the basket of currencies will also underpin the value of an alternative currency like Gold,” Jain said.