Gold held below $1,880 an ounce last week and witnessed its third consecutive week of losses, coming under pressure from a rebound in the dollar and Treasury yields as investors continued to bet on further Federal Reserve tightening to bring decades-high inflation under control, even at the risk of some economic pain. The metal was down more than 1% last week as the dollar held near its highest in 20 years against a basket of major currencies, while the benchmark US 10-year yield rose firmly back above 3%. The Fed on last Wednesday raised its benchmark overnight interest rate by 50 basis points, the biggest jump in 22 years, while Chair Jerome Powell added the bank was not considering a 75 basis-point move in the future. However, he assured Americans that the central bank will do what it takes to curb surging inflation, while acknowledging that this could risk economic pain.

 

Bullion has been sliding since mid-April as the Fed and other central banks tighten policy to fight rising consumer prices. The monetary squeeze has sent yields on US government bonds past 3% and fuelled five weeks of gains for the dollar, making gold less attractive. There could be more bond-market swings to come as a swathe of inflation data feeds the debate on price pressures and monetary policy. U.S. consumer prices are on Wednesday, with China, India, Mexico and Brazil also reporting during the week. MCX Gold June futures may fall to Rs. 51,300 per 10 gram.

 

– Jigar M Trivedi

Manager – Fundamental Research Analyst (NonAgro Commodities)