Informist, Wednesday, Jun 1, 2022

By Chinmay Mungse

MUMBAI – GOLD contracts fell sharply on the Multi Commodity Exchange of India and the COMEX today due to strength in the US dollar index and higher yields on US treasury bills.

* The most-active August gold contracts on the MCX and COMEX hit a nine-day low of 50,415 rupees per 10 gm and $1,830.2 per ounce respectively. "Strength in dollar index and bond yields is the key reason behind such sudden drop in gold prices," said Mahesh Kumar, executive vice president and head of capital and commodities market at Abans Group.

* To combat higher inflation, the US Fed will also start shrinking its balance sheet and is expected to release its beige book later today, which pushed the dollar index higher, thus putting a pressure on bullion prices.

* Speaking at an event on Monday, the US Federal Reserve Governor Waller said the central bank might raise interest rates by 50 basis points until inflation eases in the country, pushing yields on the US treasury bills higher and denting the demand for gold.

* Higher inflation in the Eurozone raised expectations from the European Central Bank to tighten its monetary policy, which further put a pressure on bullion prices.

* "We believe that the ECB will raise interest rates at its meeting in July – which will then be the first time it has done so in over eleven years," Commerzbank AG said. "The market has priced in a rate hike of 25 basis points."

* The easing of COVID-related lockdowns in China and opening up of economic activities in the country dampened safe-haven demand for the bullion. 

* At 1752 IST, the most-active contracts of bullion were:
   --August gold was down 0.7% at 50,490 rupees per 10 gm on MCX
   --August gold was down 0.8% at $1,832.6 an ounce on COMEX
   --July SILVER was down 0.5% at 60,824 rupees per kg on MCX
   –-July silver was down 0.5% at $21.57 an ounce on COMEX

* Outlook for the evening session:
   --MCX gold seen at 50,400-50,800 rupees,
   --COMEX gold seen at $1,818-$1,854
   --MCX silver seen at 60,000-61,600 rupees
   --COMEX silver seen at $21.40-$22.00

End

US$1 = 77.52 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vidhi Verma

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