Gold Rates Fall Above Rs. 1300 In 2 Days, US Fed Hikes Interest Rate By 75bps

In India, gold rates are dipping sharply this week. The US Federal Reserve on Wednesday raises its interest rate by 75bps. As a result, the US Bond yields are reaching fresh highs while the commodity markets are going red. On June 15 the 22 carat gold rate is quoted at Rs. 47,150 falling by Rs. 250, and the 24 carat gold rate is quoted at Rs. 51,440/10 grams, falling by Rs. 270. In the past two days, the yellow metal fell by around Rs. 1300. So, it is a good time to invest in gold for high long term return, when the prices are down.

The US Fed has approved the largest interest rate hike since 1994. The central bank is taking up the hard way to combat the mounting inflation rate, which stood at 8.6% YoY in the past month. Even after raising the interest rate in the past meeting, the inflation rate went up month-on-month, so, the Fed officials are quite worried. Earlier, a Wall Street Journal report said, Fed "Officials agreed to a 0.75% point rate rise at their 2-day policy meeting that concluded Wednesday, which will increase the Fed's benchmark federal-funds rate to a range between 1.5% and 1.75%."

The Comex gold futures were quoted at $1818.80/oz, surging by 0.29%, from the last trading day. Yesterday it was last quoted at $1813.50/oz. The spot gold prices were last quoted at $1822.90/oz, surging by 0.74%, from the last trading day. The US dollar index in the spot market stood at 105.57, surging by 0.27%. In India, the Mumbai Commodity Exchange (MCX) gold in August future was quoted at Rs. 50,460/10 grams, gaining by 0.53%, from the last trading day.

Any hike in the interest rate is initiated to squeeze the liquidity in the economy which is a preferred method for the central banks to plunge the inflation rate. However, the after-effects of the pandemic are quite large, and the rate hikes are not able to keep consumer prices under control. So, after a 50 bps rate hike, this time the US Fed's FOMC meeting has decided to initiate a strong 75 bps. But, investors were prepared for this step. The equity market and commodity market are expected to face a hefty fall. The gold and silver futures markets are already reflecting this trend.