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Gold Price Corrects Below Rs. 48,000 On Weak US Inflation Data, Improved Economic Conditions

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Gold and silver prices on Thursday (February 11, 2021) traded mixed mirroring trend in the international markets. On the MCX, gold futures for April delivery quoted below Rs. 48000 at Rs. 47,959 per 10 gm, down 0.11 percent at around 1:09 pm. Silver on the other hand was up in trade by as much as 0.08 percent or Rs. 58 at Rs. 68984 per kg.

 

International gold and silver rates

International gold and silver rates

Internationally, gold's appeal took a hit and prices eased. Spot gold fell 0.1 per cent to $1,839.61 per ounce by 0055 GMT. Prices scaled their highest in over a week in the last session. US gold futures slipped 0.1 per cent to $1,841.50.

Spot silver shed 0.4 per cent to $26.89 and palladium eased 0.2 per cent to $2,351.24.

Factors supporting bullion prices and denting its appeal
 

Factors supporting bullion prices and denting its appeal

After US inflation data came in weaker than expected, gold's appeal declined. Gold is regarded as a hedge against inflation. Also economic recovery with the roll out of the Covid 19 vaccine worldwide is resulting in diversion of funds. Nonetheless, the factors lending support to bullion prices are weakness in the dollar index and lower treasury yields, which are limiting losses in gold price.

"Pause in the US dollar's decline has put some pressure on gold. Also weighing on price is weaker investor interest and improvement in the virus situation. However, supporting price is Fed's cautious tone on the US economy and hopes of additional US stimulus. Gold may witness choppy trade amid lack of fresh cues however there is a possibility of correction if the US dollar manages to recover," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

Should you invest in gold prices at current price levels?

Another factor that can add to the gains in gold prices going forward may be investors' growing interest in Gold ETFs

Another factor that can add to the gains in gold prices going forward may be investors' growing interest in Gold ETFs

Amid correction in gold prices and on hopes of better returns from the precious metal, investors inflow into the gold ETF category in January month jumped 45% m-o-m to Rs. 625 crore vs Rs. 431 crore in December. Himanshu Srivastava, Associate Director - Manager Research, Morningstar India said the gold prices have come-off its all-time highs touched in August last year. The month of January also saw fair bit of correction in its prices.

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