29 Jan , 2022 By : Kanchan Joshi
Discounts offered by dealers on gold over official prices widened in India, ahead of the Union Budget to be presented next. week. Dealers offered discounts of up to $3 an ounce over official domestic prices, higher than the previous week's $2.5. Gold prices in India include 10.75% import duty and 3% GST. The government had cut import tax on gold in its 2021/2022 budget.
On MCX, gold had settled down 0.8% to Rs47610, extending the three-day selloff after US Fed signalled rate hikes from March. Gold has now shed about Rs1,500 per 10 gram in three sessions, in tandem with similar fall in global markets. Silver on MCX settled 1.4% lower at Rs61,100.
In global markets, bullion extended declines on Friday, dropping more than 2% this week. U.S. gold futures fell to settle at $1,792.
Earlier this week, the US Federal Reserve reaffirmed plans to end its pandemic-era bond purchases and signalled an interest rate hike in March. Rate hike expectations pushed the dollar to a multi-month high, making bullion less attractive for overseas buyers. Rising rates also increase the opportunity cost of holding non-yielding bullion.
The US dollar also got support from strong US GDP data (6.9% QoQ vs expectations 5.5%), which reinforced market's expectation for monetary policy tightening by the Federal Reserve, IFA Global said in note.
On the other hand, analysts say that gold could be supported at lower levels by Ukraine-Russia tensions and volatility in financial markets as they adjust to a rising interest rate environment. Gold is considered as a hedge against inflation.
“Weighing on price are expectations of faster and aggressive rate hikes by Fed and strong US growth data. Gold has corrected after failing to sustain above $1850/oz and a drop below $1800/oz has further dented market sentiment. But we may not see a sustained decline amid weaker risk sentiment," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
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