Gold prices are dropping, while silver rates are also declining

Gold and silver prices in India continued their recent losses, after a significant drop in worldwide markets. Gold futures on the MCX were down 0.4 percent at 50483 per 10 gramme, while silver futures were down 0.43 percent at 60,049 a kg. Gold was down 2% on Monday, while silver was down 2.6 percent.

Gold was trading near a four-week low of $1,825.97 per ounce on world markets. Gold has been under pressure due to a strong US dollar and bullion liquidation to cover losses in other assets, according to analysts.

The opportunity cost of storing bullion, which pays no interest, rises as short-term interest rates and bond yields rise in the United States.

The dollar remained the preferred safe haven, holding near a two-decade high reached on Monday and luring most investors away from greenback priced gold.

“Gold saw a sharp selloff on Monday, as it fell more than $50 on the day in response to rising yields and a strong U.S. dollar. The precious metal is struggling, as investors are still digesting the US inflation numbers, published last week. The heightened volatility and short rally that we witnessed in gold post the US inflation data was widely expected to fizzle out quickly, as the Fed’s reaction was logically a hawkish stance, which played out yesterday,” said Pritam Patnaik, Head – Commodities, HNI, and NRI Acquisitions, Axis Securities.

In a note Kotak Securities said “market uncertainty may remain high ahead of Fed decision later this week. Fed is largely expected to raise interest rate by 0.5% and this has been factored in. Market players may want more clarity if the central bank plans to fasten the pace of rate hikes to control rising price pressure. Market players may also look at economic projections to gauge impact of monetary tightening on economic activity.”

While the Fed’s monetary tightening discussion has unsettled market participants, risk appetite has also taken a knock as China has seen a new increase in viral cases, forcing officials to shut down key locations for mass testing. China has maintained its zero-tolerance approach and is imposing limitations to limit viral spread, raising concerns that any economic recovery in the country will be hampered unless virus propagation is completely contained.