Silver and gold prices fell sharply in Indian markets, amid a slump in global rates as higher US bond yields and a rebound in US dollar weighed on the precious metal. On MCX, February gold futures slumped ₹2050 to ₹48,818 per 10 gram on Friday while silver futures tanked ₹6,100 or 8.8% to ₹63,850 per kg.
“Gold prices fell sharply in Indian markets on Friday amid selloff in global gold price because of the rise in the dollar index. With the new government almost confirmed in US and hopes of large stimulus measures, a jump in US Treasury yields a climb in the equities weighed on gold prices, The dollar has also rebounded and investors are running to book profits. The short-term range is ₹ 52000 to ₹ 48500,”.
In global markets, spot gold dropped 3.4% to settle at $1,849.01 an ounce, its first weekly decline in six weeks. Silver slid 6.3% to $25.4234 an ounce after falling as much as 9.8%.
The US 10-year yield touched a peak above 1.12% with rates supported by President-elect Joe Biden’s call for trillions of dollars in immediate further economic support.
The US dollar index jumped 0.26% to 90.023 against a basket of currencies.
Gold, which gained about 25% last year, is seen as a hedge against the inflation and currency debasement that may result from widespread stimulus. But higher bond yields increase the opportunity cost of holding non-interest yielding bullion. Democrat control of the US Senate has raised the prospects of large stimulus measures.
Gold prices have swung wildly since the start of this year as traders weigh rising yields against expectations for additional economic stimulus that could bolster the metal. Friday’s drop was also attributed to the breach of key technical level of 100-day moving average, Bloomberg reported, citing analysts.
Meanwhile, in India, the 10th tranche of sovereign gold bonds of this fiscal will open for subscription from January 11 to January 15, 2021. The issue price for the sovereign gold bond has been fixed at ₹5,104 per gram of gold while those applying online and making payment through digital mode get a discount of ₹50 per gram.
Nish Bhatt, Founder & CEO, Millwood Kane International said additional fiscal stimulus by the incoming administration at the White House, global economic recovery, and the speed of the vaccination process will guide prices of gold.