Gold Prices Set To Fall By Rs 1,000 As International Prices Plunge

Gold rates in Indian cities are set to fall by Rs 1,000 per 10 grams at the very least on Saturday, as international prices fell by 2.5% in trade. The MCX which trades until 11 pm, saw gold prices fall by Rs 952. Jewellery associations in the country, which take cues from the MCX prices would quote these same rates.

Gold in Indian cities was trading around that Rs 44,600 to Rs 46,600 per 10 grams for 22 karats on Friday and hence it should open lower on Saturday from these levels.

In the global markets gold fell to its lowest in over a month after a strong U.S. jobs report boosted expectations the Federal Reserve could begin tapering its economic support sooner than previously anticipated.

Spot gold fell 2.3% to $1,763 per ounce after touching its lowest since June 30 at $1,757.

Strong US Jobs data, pushes gold prices lower

Hiring in the United States rose for the month of July at its fastest pace in nearly a year despite fears over Covid-19′s delta variant and as companies struggled with a tight labor supply, the Labor Department reported.

Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%, according to the department's Bureau of Labor Statistics. The payroll increase was the best since August 2020.

This strong jobs data may now push the US Fed to begin partial withdrawal of its easing programme much earlier than anticipated.

Many analysts believe that gold could now be headed lower in the direction of $1700 an ounce. However, support could arise near these levels as the globe is still awash with liquidity and this could lead to buying at lower levels.

"The Fed has underscored that their decisions in terms of when they will begin to taper, as well as normalizing interest rates, are tied directly to the state of the economy. More so, they have adjusted their dual mandate which was to facilitate full employment and maintain a target inflationary rate of 2% to focus upon full employment while letting inflationary rates run hot. Their rationale is that much of the current upticks in inflationary pressures are transitory and will be alleviated as the country continues to rebound returning to a much more robust economy," says Amit khare, AVP- Research Commodities, Ganganagar Commodities, Limited.

Meanwhile, the Sovereign Gold Bonds have now opened for subscription.

According to Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm, the price for the Fifth tranche of SGB is fixed at Rs 4790/gm.
"Investment in non-physical gold, via digital or paper gold, is highly recommended as it provides high liquidity, no storage cost, and is easier to sell vs physical gold. Investment in SGBs comes with an interest coupon payable semi-annually. Investment in SGB is a superior alternative to physical gold. The investments in non-physical gold will help the government to keep a check on the currency and larger fiscal deficit.

Gold prices have softened in the past few weeks to touch a 1-month low. In the past one week alone, it has dropped nearly Rs 1,000/10gm in value. The rising US Dollar and Treasury yields on the back of a sooner than expected policy tightening by the Fed have largely led to softening of gold prices. Gold prices domestically and internationally have traded in a narrow range in the past few months. The latest variant of the virus, the pace of vaccination, unlocking, and signs of policy tightening by the Fed will guide gold prices going forward," he says.