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Gold prices today slip further on strong dollar, US stimulus plans


NEW DELHI: Gold and silver prices continued their decline on Thursday, following the trend in the international market, as US lawmakers prepared to come out with a massive stimulus plan while the dollar continued to gain strength.

As much as $380 billion from the US Congress’ last big coronavirus aid package is unused and could help households and businesses if lawmakers approve, Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin said on Thursday.

Meanwhile, democrats in the US House of Representatives are working on a $2.2 trillion coronavirus package that could be voted on next week.

Gold futures on MCX were down 0.27 per cent or Rs 133 at Rs 49,771 per 10 grams. Silver futures fell 0.77 per cent or Rs 459 to Rs 59,170 per kg.

goldpricetoday

In the sport market, gold price fell for the fourth consecutive day on Thursday, declining by Rs 485 to Rs 50,418 per 10 grams in the national capital amid weak international trends, according to HDFC Securities. Silver also tumbled by Rs 2,081 to Rs 58,099 per kilogram.

Is gold’s rally over? Here are five key charts to watch

Temporary blip?

Gold’s slump this week is forcing investors to ask whether the haven asset is taking a breather or facing an even sharper decline.

Unprecedented global stimulus, negative real rates and a weakening dollar pushed bullion to a record high above $2,075 an ounce in early August. While some banks, including Goldman Sachs Group Inc. and Bank of America Corp., forecast even higher prices, a resurgent dollar has seen gold give up some of its gains.

Is this merely a temporary setback for the precious metal? Here are five charts that provide hints as to where gold goes next: (By Eddie Spence)

Dollar Dominance

The key driver of gold right now is the dollar. This week the U.S. currency strengthened, even as the Federal Reserve remained ultra dovish on interest rates. The dollar’s newfound vigor is linked to fading hopes of more stimulus from the U.S. That’s depressed gold, even as Covid-19 infections spike across Europe and fatalities exceed 200,000 in the U.S.

“The firm U.S. dollar is like a millstone around the neck of precious metals prices, and is putting pressure on gold despite increased risk aversion,” Carsten Fritsch, an analyst at Commerzbank AG, wrote in a note. Still, Fed policy will remain expansionary for years, so “the strength of the dollar is hardly likely to last,” he said.

Plateauing rates

Gold’s investment appeal over the summer was burnished as real treasury rates slid deeper into negative territory. Since early August, those rates have been flat, and it will take a significant boost to inflation expectations to drive them lower.

Breakevens — measures that draw on pricing of nominal and inflation-linked Treasury debt to create a proxy for price gains — have been declining since August. With the global economic recovery stuttering as the virus flares, inflation is unlikely to be uppermost in the minds of investors, according to Ole Hansen, head of commodity strategy at Saxo Bank A/S.

Key milestones

Gold’s decline this week gathered momentum after it slipped below its 50-day moving average, which technical traders can take as a signal to sell. The metal’s next key threshold — the 100-day moving average — should provide some resistance to falling prices. However, a drop below that level could trigger further selling. Spot gold fell 1.9% to close at $1,863.34 an ounce on Wednesday, the lowest level since July 21.

ETF watchers

Investors’ favorite way of buying gold this year has been through exchange-traded funds, which have added 870 tons of bullion. After gold slipped on Monday, ETFs saw their largest inflows in at least a year as investors bought the dip. However, a second day of price declines didn’t spark the same appetite, with some selling of bullion-backed funds, according to preliminary data compiled by Bloomberg.

“ETFs increased in recent days and now they pause to see what will happen,” said Georgette Boele, a precious metals strategist at ABN Amro Bank NV. “If weakness continues, they will sell quickly again.”

Globally, gold inched lower pressured by a firm dollar, and was on track for its worst week in over a month.

Spot gold fell 0.2 per cent to $1,864.47 per ounce by 0113 GMT. Prices are down 4.4 per cent so far for the week. US gold futures were down 0.4 per cent to $1,870.30.

The dollar index is up 1.5 per cent for the week, its best since early-April. A firmer dollar makes bullion more expensive for holders of other currencies.

The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery was running out of steam.

China’s monthly net gold imports via Hong Kong edged lower in August, data showed, although a slight improvement in domestic demand pushed total imports to a five-month high.

Silver fell 1.1 per cent to $22.95 per ounce, platinum was down 0.3 per cent, to $846.72 and palladium was flat at $2,226.44.

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