Last night, the Indian government reduced the base import prices of gold and some edible oil.
In global markets, the yellow metal struggled near two-year lows amid elevated US dollar and prospects of aggressive US rate hikes. Spot gold was t $1,664.48 per ounce and has fallen 3% so far this week. A US dollar and firm bond yields dampen the appeal of the yellow metal. A stronger greenback makes gold expensive for overseas buyers. Though gold is considered an inflation hedge rising interest rates increase the opportunity cost of holding the non-yielding asset.
Among other precious metals, spot silver dipped 0.7% to $19.01 per ounce.
Despite the recent dip in prices, gold ETF inflows remain muted. The holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.15% to 962.01 tonnes on Thursday from 960.56 tonnes on Wednesday.
Applications for US unemployment insurance fell for a fifth straight week, and while retail sales unexpectedly rose in August, the prior month’s number was revised sharply lower. These reports came on the heels of US consumer and producer price indexes earlier this week that showed inflationary pressure in the economy.
The US Federal Reserve is increasingly expected to implement a rate hike of at least 75 basis points next week. Higher rates tend to weigh on non-interest bearing bullion.
“Also weighing on gold prices are concerns about consumer demand as virus related restrictions hamper economic activity in China. Gold may remain volatile as market player react to economic numbers and central bank comments however general bias may be on the downside on expectations that Fed may continue with aggressive hikes," Kotak Securities said in a note.
“Trend in the US dollar, bond yields and equities may continue to affect gold and silver and focus will be on economic data, central bank comments and development relating to Europe’s energy crisis and China’s virus spread," the brokerage added.
