Updated on: Monday, August 09, 2021, 07:31 PM IST

Gold prices may remain under pressure as market players react to US non-farm payrolls report

"Gold prices witnessed selling with rise in US bond yields," according to HDFC Securities, senior analyst (Commodities), Tapan Patel./ Representational image |


Gold prices fell Rs 402 to Rs 46,238 per 10 grams in the futures trade on Monday, as speculators cut their positions amid low demand.

On the Multi Commodity Exchange, gold contracts for the October delivery traded lower by Rs 402, or 0.86 per cent, to Rs 46,238 per 10 gram in a business turnover of 13,655 lots.

Analysts attributed the fall in gold prices to trimming of positions by participants.

Globally, gold traded 0.79 per cent lower to $1,749.10 an ounce in New York.

The US government is printing more money; and giving unemployment benefits to its citizens. The money that is being printed by the government is not going into gold investments as it happened in the past. As it is easy money, people are investing it into stocks indicating their risk appetite is very high, say analysts.

In the pandemic, it is a strange scenario--markets are going up, gold prices are going down. What gives? Sanjiv Arole, bullion analyst, explains: "The demand for gold should go up and people should buy it as an investment. When the US government is printing more money, the value of the dollar has to fall. Once that happens, people will shift to investing in gold. Since the interest rates are low during the pandemic, people should ideally choose to invest in gold but that is not happening," he said.

The Dow Jones Industrial Average (the Dow) has been rising. During the stock market crash of 2020, that began in March, the Dow fell to a record 2,013.76 points to 23,851.02. The Dow is the index of the 30 top-performing US companies. Now it is rising at 35,000. The BSE Sensex had fallen to nearly 25,000 and 26,000 is now at an unrealistic number beyond 50,000-mark.

Though India is the largest consumer of gold, the price is set by the West. "The price of gold in ounces is converted to rupee and then premium (whatever is applicable) and import duty is added to it. What happens in the US impacts gold prices at home," said Arole.

COMEX gold has been volatile since the start of Monday (August 9). However, it has recovered from the session low of $1677.9 per ounce and is currently trading 1 percent lower near $1746 per ounce. What is weighing on the gold price is increased expectations of Fed’s monetary tightening post US non-farm payrolls data and some hawkish comments by Fed officials. ETF outflows also show weaker investor interest amid continuing firmness in equities. However, rising virus cases and increased geopolitical tensions have lent some support.

Gold may remain under pressure as market players react to US non-farm payrolls report, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

NYMEX crude extended the losses as it trades about 4 percent lower near $65.5/bbl. Weighing on crude price is firmness in US dollar, rise in US rig count to April 2020 highs, concerns about rising virus cases, and a slowdown in the Chinese economy. However, supporting price is optimism about the US economy and increasing tensions relating to Iran. Crude may remain under pressure however we may see some recovery if US equities continue to hold firm, added Rao.

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Published on: Monday, August 09, 2021, 05:59 PM IST