Gold rates today in India fall to 7-month lows after Fed rate hike

Gold and silver prices in India fell today in tandem with a drop in international prices. On MCX, gold futures were near 7-month lows of 49,321, down 0.25%, while silver fell 0.4% to 57,059 per kg. In global markets, spot prices of gold fell 1% to $1,656.97 per ounce, buffeted by a strong dollar and firm bond yields after the US Federal Reserve overnight increased interest rates by another 75 basis points and signaled more hikes. US Treasury two-year yields, which closely track the Fed rates, rose further above 4% to the highest since 2007.

Gold is seen as a hedge against inflation but rate hikes to tame inflation tend to raise the opportunity cost of holding zero-yield bullion. Spot silver slumped 1.7% to $19.26 per ounce while platinum fell 1.1% to $897.92.

Despite the recent slide in gold prices, investors refused to jump in. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.12% to 952.16 tonnes on Wednesday from 953.32 tonnes on Tuesday.

“While the Fed’s 75 bps rate hike and reiteration of the hawkish message were on expected lines, indication that the terminal rate is likely to be 4.6% was higher than market expectations. US 10-year bond yield spiking above 3.5% and the dollar index above 111 are unnerving for equity markets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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