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India Bullion: Falls on MCX, COMEX on firm dlr, higher rate hike bets

Informist, Thursday, Jul 14, 2022


By Chinmay Mungse


MUMBAI – GOLD and SILVER contracts fell significantly on the Multi Commodity Exchange and COMEX today due to a stronger dollar and expectations of a hawkish stance by the US Federal Reserve to tame inflation. 


* The most active August gold contracts on the MCX and COMEX fell more than 1% today after the dollar index, which measures strength in the US currency against a basket of six major currencies, rose to 108.72, the highest level since October 2002.


* The likelihood of aggressive monetary policy tightening by the Fed increased after the data on Wednesday showed that CPI inflation in the US accelerated to 9.1% in June, the highest in nearly 41 years.


* “Bullion could remain under pressure amid fears that the Federal Reserve could go for a more aggressive interest rate hike this month after data showed US inflation sky-rocketed in June,” said Sriram Iyer, senior analyst at Reliance Securities.


* According to the CME FedWatch Tool, markets are pricing in a nearly 80% probability of a 100 basis point increase in the interest rates by the Fed in its meeting later this month.


* The expectations of a 100 bps rate hike also drove US treasury bond yields higher, which further dulled the demand for the non-interest yielding bullion.


* However, a steep interest rate hike could aggravate worries of a global recession, which could limit the fall in bullion prices. “The Fed’s ‘front-loading’ commitment may not go down too well for the market, as a recession looks imminent,” said fxstreet.com


* At 1651 IST, the most-active contracts of bullion were:
   –August gold was down 0.8% at 50,383 rupees per 10 gm on MCX
   –August gold was down 1.5% at $1,710.6 an ounce on COMEX
   –September silver was down 1.8% at 56,124 rupees per kg on MCX
   –-September silver was down 2.9% at $18.585 an ounce on COMEX


* Outlook for the evening session:
   –MCX gold seen at 49,940-50,800 rupees
   –COMEX gold seen at $1,703-$1,730
   –MCX silver seen at 55,870-57,810 rupees
   –COMEX silver seen at $18.57-$19.23




US$1 = 79.88 rupees

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


Edited by Aditya Sakorkar


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Source: Cogencis

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