Gold prices eased in global markets as the US dollar climbed higher on expectations of a less dovish US Federal Reserve. The same trend was reflected in the Indian markets, with August gold futures contracts on MCX sliding 0.5% to ₹34,397. In global markets, spot gold was down 0.4% to $1,392.50 per ounce. Investors are looking for clues from Federal Reserve Chairman Jerome Powell’s congressional testimony due later in the day. On Friday, gold futures on MCX hit a record high of ₹35,100 after India hiked import duty.
Gold prices have slipped this week after strong US job numbers, released on Friday, reduced the possibility of aggressive rate cuts from the Federal Reserve. Expectations for a 50 basis point rate cut this month have evaporated, according to analysts, but investors still expect a 25 basis point cut due to weak inflation and trade war worries.
On Tuesday, gold of 99.9% and 99.5% purity plummeted ₹600 each to ₹34,870 per 10 gram and ₹34,700 per 10 gram, respectively, in Delhi market, amid easing demand from local jewellers, according to the All India Sarafa Association.
Putting further pressure on gold prices, the US dollar edged toward a three-week high against a basket of major currencies today, as fading expectations of an aggressive US interest rate cut pushed Treasury yields higher. Higher interest rates boost the dollar, making dollar-denominated gold more expensive for buyers using other currencies and reducing investor interest in non-yielding bullion.
However, many analysts remain positive on gold, citing support from Middle East tensions, the trade war and buying by central banks. Top gold consumer China’s reserves jumped to $87.27 billion from $79.83 billion at end-May.
On the trade front, White House economic adviser Larry Kudlow said US and Chinese trade officials held a “constructive” phone conversation on Tuesday. Commerce Secretary Wilbur Ross said the US government will issue licenses to companies seeking to sell goods to China’s Huawei where there is no threat to national security. (With Agency Inputs)