Gold Prices May Correct Further As Dollar Not Seen To Soften In Near Term: Credit Suisse

Gold prices in India traded in a range during the week to March 19, 2021, though on a weekly basis it posted minor gains. On the MCX, gold futures for April delivery settled higher by just Rs. 57 at Rs. 45008 per 10 gm. While, silver futures for May delivery lost Rs. 294 to close at Rs. 67,453 per kg.

Gold Prices May Correct Further As Dollar Not Seen To Soften In Near Term: Credit Suisse

The precious yellow metal has been facing pressure of late owing to increase in US treasury yield and resilience in the US dollar, said global wealth management company Credit Suisse in a note.

Any rise in US treasury yield makes gold less attractive as it increases the opportunity cost of holding the non-yielding bullion. "Gold has been losing momentum as economic growth optimism is growing. In recent weeks, the spike in the US Treasury yields, as well as a rebound in the US dollar, also weighed on gold prices. Moreover, a rapid progress with vaccinations and substantial additional fiscal stimulus have boosted risk appetite. Given this backdrop, gold investors are taking a cautious stance, resulting in sharper exchange-traded fund (ETF) outflows," added Credit Suisse.

Thus from the August highs of Rs. 56200, gold prices have dropped as much as Rs. 11000 per 10 gm.

Outlook for gold prices going forward

"Gold prospects have deteriorated as the US dollar is no longer expected to weaken in the near term and US Treasury yields continue to rise. As a result, our commodity team has lowered gold 3-month and 12-month forecasts to $1750 and $1700 per ounce, respectively," Credit Suisse said.

International gold rates

In international markets, gold prices softened to around $1735 per ounce in the previous day's trade as a recovery in the US dollar and higher yield continued to weigh. Gold gains appeal in times of economic and geo-political stress or when there is a threat of inflation trending higher.

During the week, in its FOMC meet, the US central bank committed to continue with its dovish stance and maintain key policy rates near zero. Also, it sees the US economy to grow at a higher rate and expects inflation too to inch higher.

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