Gold is down nearly Rs 10,000 compared to 2020
The yellow metal declined in India by 2.3%, which equals Rs 1,100 this week, extending this year’s dip. Gold prices on Multi Commodity Exchange settled flat Rs 46,190 per 10 gram, taking its year-to-date fall to nearly Rs 4,000 per 10 gram. Meanwhile, in the previous year, it hit a high of Rs 56,000. According to the latest news, the yellow metal is down nearly Rs 10,000 per 10 gram. Based on Bloomberg’s research, gold’s start to this year was the worst since 1991.
According to Kotak Securities, gold has been under pressure as market players assess the implication of higher bond yields. Notably, higher inflation expectations have boosted yields, increasing the opportunity cost of holding non-yielding bullion.
Benchmark U.S. Treasury yields have increased to a close to a one-year high, souring the non-interest-bearing metal’s appeal. On Comex, gold futures hit $1,777 per ounce. Higher yields mean an improving economic outlook and raised inflation and interest rate hike expectations.
Gold should still benefit from resumed loose monetary policy
Moreover, weighing on the gold price is weaker investor interest, as is evident from ETF outflows. It has to be mentioned that ETF purchases were a key driver of gold’s rally to a record in August and could further pressure prices if outflows are maintained.
According to Nish Bhatt, Founder & CEO, Millwood Kane International, the rise in the U.S. Treasury yield and a stronger greenback, optimism of a larger economic stimulus package, and the vaccination drive has led to downside pressure on gold prices. The growing treasury yield is suggestive of a recovery in the U.S. economy.
Analysts believe that gold should still benefit from resumed loose monetary policy and low real interest rates in 2021.
Kotak securities announced that stimulus measures are likely to resume. U.S. b tweeted that he wants to go big on the coronavirus relief package. Also, growing price pressure may boost gold’s appeal as an inflation hedge.
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