Gold prices today fall for 4th day to near 1-month low, silver rates tumble

Gold and silver prices today fell sharply in Indian markets amid weak global rates. On MCX, gold futures were down 0.6% to near one-month low of ₹48,845, extending losses to the fourth day. Silver futures on MCX also fell 0.6% to ₹66,130 per kg. Indian markets were closed on Tuesday for a public holiday. Gold has come under pressure in recent days on concerns that US stimulus package could be delayed, Livemint reported.

According to Good Returns website, the price of 10 gms of 22-karat gold in Delhi-NCR slumped to 48,090, while in Mumbai it was Rs 48,330.

In international markets, gold prices dipped today ahead of the US Federal Reserve's monetary policy decision due later in the day. Gold eased 0.3% to $1,845.30 an ounce while silver was flat at $25.43 an ounce. While the US central bank is not expected to make any major announcements, traders will be keen to find out about any new plans for monetary policy.

"Gold prices may remain volatile ahead of the US Federal Reserve’s monetary policy decision due later in the day. Immediate support of $1800 is likely to hold the downside and would trigger recovery pullbacks in prices. However, a direct rise above $1885 is needed to stabilise the momentum," said Hareesh V, Research Head Commodities at Geojit Financial Services.

Focus is on also Washington as lawmakers prepare to discuss Joe Biden's $1.9 trillion economic rescue package with investors seek more clarity on the timeline for Covid-19 relief plan.

ETF demand continued to remain weak. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , fell 0.1% to 1,172.38 tonnes on Tuesday.

Also on investors' radar will be data releases later today on US fourth-quarter GDP, initial jobless claims and new home sales.

Meanwhile, the IMF on Tuesday raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

Analysts say that US stimulus hopes continue to support gold at lower levels. However, volatility has increased as market players position for policy changes under Biden administration, they say adding that domestic players also awaiting Budget to get clarity on import duty. Gold prices in India include 12.5% import duty and 3% GST.

Trend in US dollar index has been key price determining factor for gold in recent days. Today the dollar index was slightly higher at 90.203. On the other hand, gold has got support on the lower side from its safe-haven appeal amid rising coronavirus cases and mixed economic data from major economies and increased US-China tensions.

Gold Price Analysis: XAU/USD in stasis, impending death cross may be a bear trap

Gold lacks clear directional bias despite an improved risk appetite and weakness in the US dollar. The yellow metal's daily chart shows key averages are set to chart a bearish crossover, said Fxstreet.

At press time, gold is trading near $1,845 per ounce, having dropped by 0.24% on Monday.

The US President Joe Biden announced on Tuesday that his administration is boosting weekly vaccine supply, weakening the selling pressure in stocks, and pushing the anti-risk dollar lower. Additional bearish pressure likely emerged from the International Monetary Fund's upward revision of the 2021 global growth forecasts.

The dollar index, which tracks the greenback's value against majors, fell 0.27% to 90.27 on Tuesday and is trading flat near that level at press time. So far, however, the dollar weakness has failed to propel gold higher.

The bulls need quick progress, as the 50-day Simple Moving Average (SMA) is on track to cross below the 200-day SMA in the next couple of days. That would confirm a death cross, a long-term bearish indicator.

However, crossovers are lagging indicators, as SMAs are based on historical data and often mark major bottoms/tops. The metal's downtrend from the record high of $2,075 reached in August may bottom out with the impending death cross.

A move above the lower high of $1,875 created on Jan. 21 is needed to confirm a short-term bullish reversal. Meanwhle, the Jan. 18 low of $1,802 is the level to beat for the sellers.

Price of Gold Fundamental Daily Forecast – Buyers Facing US Stimulus Hurdle Ahead of Fed Decisions

Traders have been pricing in additional stimulus for weeks, but it continues to get pushed down the road, according to Fxempire.

Gold futures are trading flat on Tuesday with gains being capped by a firmer U.S. Dollar and uncertainty over a U.S. stimulus package. Also helping to hold prices in a range is indecision ahead of Wednesday’s U.S. Federal Reserve interest rate and monetary policy announcements. Slightly higher Treasury yields are also helping to limit gains.

US Stimulus Headwinds

U.S. President Joe Biden’s $1.9 trillion pandemic relief proposal faces hurdles as Republicans objected to it for being too expensive and pushed for a smaller plan targeting vaccine distribution.

“We are trying to calibrate not just the amount but the timing of new stimulus, and both of those, side by side are almost impossible to analyze,” said Art Hogan, chief market strategist at National Securities in New York.

“If you look at the (stock) market’s reaction post-election, part of the ramp we have seen, and it’s been pretty significant, has been on the back of likely stimulus and the timing, which is sooner rather than later. Now we have to reset our thinking.”

The same goes for gold. Traders have been pricing in additional stimulus for weeks, but it continues to get pushed down the road.

US Federal Reserve Announcements

Fed policymakers have little doubt that costs for many goods and services will jump this year, a bitter pill for consumers if gasoline, travel and other prices start to rebound from sharp declines last year. But, Fed officials argue, that’s part of getting back to normal, not the start of a more persistent inflation problem.

“As people return to their normal lives … there could be quite exuberant spending and we could see upward pressure on prices,” Fed Chair Jerome Powell told a Princeton University seminar earlier this month.

“The real question is how large is that effect going to be and will it be persistent?” Powell said. “A one-time increase in prices … is very unlikely to mean persistently high inflation.”

Powell and other Fed officials will likely reinforce that message after their two-day policy meeting this week.

Few if any changes are expected to the Fed’s policy statement and no new economic forecasts are scheduled to be released.

Daily Forecast

Trading volume is light ahead of Wednesday’s Fed announcements, but if there is any significant movement it will be triggered by the movement in Treasury yields and the U.S. Dollar. A bullish tone could develop on a sustained move over $1849.70. The bias could shift to the downside if $1843.00 fails as support.

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