Gold and silver prices edged lower on September 2 in the Asian markets amid silent global cues and strong local currencies like the rupee. On MCX, October gold futures lost 0.35% while silver futures slumped 1.3%. In the previous session, the gold futures had also lost 0.44% while silver futures had risen 0.4%. Gold prices in India have been quite volatile since the prices hit record highs on August 7.
Turning to the global markets, gold prices inched higher supported mainly by the weakening US dollar. However, these gains were muted by the strong US manufacturing data which was seen to push up the global risk sentiment. Spot gold had gained 0.1% at $1,971.07 per ounce while US gold futures were steady at $1,978.90.
Among the other precious metals, platinum rose 0.3% to $943.63 while silver gained 0.3% to $28.25 per ounce. Kotak Securities said in a note:
“Gold has bounced back sharply after taking support near $1900/oz level however the momentum is weakening and we could see choppy trade if there are no fresh triggers. Hence one should wait for a corrective dip before creating fresh long positions.”
The persistent strength in the United States and global equity markets coupled with sluggish ETF activity and weaker consumer demand are weighing on the gold price. The dollar index was seen to hold steady at near two-year lows.
It all happened after investors bet that interest rates in the United States would remain low for longer; under the new monetary policy framework that was outlined by Fed Chairman Jerome Powell last week.
Low-interest rates reduce the opportunity cost of holding non-yielding gold; while a weak dollar makes the precious yellow metal cheaper for the holders of the other currency. Data released on September 1 indicates that US manufacturing activity accelerated to a nearly two-year high last month amid a surge in new orders.
Gold prices are up almost 30% so far in 2020; as governments and central banks across the world rolled out unprecedented stimulus to prop up the economies amid the current health crisis. White House chief of staff Mark Meadows also commented that Senate Republicans might take up their coronavirus relief bill in the coming week offering $500 billion in additional federal aid.
In several other countries, stimulus packages have resulted in inflation. But, governments and central banks are putting in all these efforts to stabilize their economies due to the aftermath of COVID-19 related limitations. In India, the latest tranche of sovereign gold bonds is currently open for subscriptions. It will close on September 4.