Gold slips after Dhanteras 2021, cues awaited from US Federal Reserve

Source :Sify
Author :Finance Desk
Last Updated: Thu, Nov 4th, 2021, 02:49:07hrs
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Mumbai | Chennai | New Delhi: Gold prices across India eased by a margin of Rs 300 per gram while international prices moderated.

On Dhanteras, the first day of the five day festival of Diwali, gold prices opened higher with traders and associations quoting a higher price per gram.

However prices cooled within a few hours owing to weaker international cues.

On Wednesday, the second day of Diwali also observed as Narakachaturdashi or "Choti Diwali" the gold price saw a drop.

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MCX futures saw a drop in range of 0.50 - 0.55 percent.

The reason has been attributed to investor interest in the yellow metal. US Spot Gold traded below the $1,780 mark a day after inching closer to the $1,800 levels. The London fix price effective for today was reported at $1,790 with probability of a further easing.

According to traders fresh cues from the US Federal Reserve have been awaited. The US Fed is likely to announce a timeline of tapering of its massive billion dollar monthly bond buying program.

At present, the US Fed has been purchasing government and government backed bonds worth $120 billion every month ever since the Coronavirus pandemic broke. During this timeline, the US Fed's balance sheet has ballooned to $8.5 trillion with nearly half of that accrued from the bond-buying program during the pandemic.

Tapering of this bond buying program is likely to arrest inflation while such moves are likely to cause momentary setbacks in the bond market and also cause currency volatilities. Both are likely cues for the yellow metal.

Although Jerome Powell, the US Fed chief has indicated that the regulator will maintain an "Accomodative" stance, he also added that any major decision would be taken keeping in mind inflation and unemployment data. The latter has seen a spurt in recent days which has also been the reason for high inflation.

Investors and traders understand that the taper is likely to start from December with the regulator paring $15-20 billion each month and by 8-9 months reaching the zero level. However, remarks about the exact timeline and the impact assessment from the US Federal reserve are likely to be major factors in deciding where to invest.

Gold rates until the US-Fed announcement are likely to trade subdued according to several analysts.

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