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Why gold prices are falling

The rise in US dollar and treasury yields, following positive comments from a US Federal Reserve official, and upbeat manufacturing data in the country also contributed to the slide in gold prices.

twitter-logoBusinessToday.In | February 17, 2021 | Updated 16:06 IST
Why gold prices are falling
The announcement of cut in customs duty on gold in the Union Budget, coupled with other factors, has brought the price of the precious metal to the lowest level in about eight months.

Continuing the downward slide, gold prices fell for the fifth day in India on Wednesday. On the Multi Commodity Exchange (MCX), gold futures for April contracts were trading 0.69 per cent lower at Rs 46,575 per 10 gram, while silver contracts for March were trading 0.97 per cent lower at Rs 68,700 per kg.

The announcement of cut in customs duty on gold in the Union Budget, coupled with other factors, has brought the price of the precious metal to the lowest level in about eight months. In August, gold prices had touched a record high of about Rs 56,200 per 10 gram on MCX.

Also read: Budget 2021: Gold customs duty cut to reduce not just prices but also smuggling

The rise in US dollar and treasury yields, following positive comments from a US Federal Reserve official, and upbeat manufacturing data in the country also contributed to the slide in gold prices. Besides, optimism about $1.9 billion stimulus package by Joe Biden administration led to the yellow metal losing some appeal.

While the dollar index rose 0.23 per cent to 90.72 on Wednesday, spot gold was trading 0.49 per cent lower at $1,785.67 per ounce globally.

The COVID-19 pandemic and lockdowns had led to a surge in gold prices globally. However, a decrease in infections, opening up of economies, increase in vaccination pace and the surge in equities market have decreased the appeal of the yellow metal, as per analysts.

While gold prices may go to as low as Rs 45,000 in the short-term, every dip will be a buying opportunity, analysts believe. As the coronavirus cases decline in India and economy opens up, the upcoming wedding season will see a rise in the demand for gold jewellery which will lead to an increase in the price of the precious metal.

Also read: India's Gold demand drops 35% in 2020

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