India / Gold prices crash over ₹2,000 per 10 grams in a day

New Delhi: Gold and silver prices suffered steep losses on Friday, tracking a sharp decline in global rates. On MCX, February gold futures slumped 4% or ₹2050 to ₹48,818 per 10 gram while silver futures tanked ₹6,100 or 8.8% to ₹63,850 per kg. In global markets spot gold dropped nearly 4% to $1,833.83 per ounce as a jump in US Treasury yields hammered bullion's safe-haven appeal.

Democrat control of the US Senate has raised the prospects of large stimulus measures, lifting the benchmark 10-year bond yield to its highest levels since March. Further building the case for a significant shot of stimulus, December US nonfarm payrolls data showed the economy shed jobs for the first time in eight months in December.

Higher bond yields increase the opportunity cost of holding non-interest yielding bullion though gold is seen as a hedge against the inflation and currency debasement that could result from widespread stimulus. Other precious metals like silver and palladium also suffered sharp drops.

Weighing on gold price is also a recovery in US dollar on rising bond yields, says Kotak Securities in a note. The jump in US 10-year bond yield to above 1% levels highlights the improved outlook for US economy, increased inflation expectations and higher interest rates, it added.

Meanwhile, in India, the 10th tranche of sovereign gold bonds of this fiscal will open for subscription from January 11 to January 15, 2021. The issue price for the sovereign gold bond has been fixed at ₹5,104 per gram of gold while those applying online and making payment through digital mode get a discount of ₹50 per gram.

The issue price for the Bonds (Series IX), which were open for subscription from December 28, 2020, to January 1, 2021, was ₹5,000 per gram of gold.

Sovereign Gold Bond 2020-21 is issued by RBI on behalf of the Government of India.

“The price for the tenth tranche of sovereign gold bond, the first for the current calendar year has been fixed at ₹5104/gm with a ₹50/gm discount for an online subscription. Sovereign gold bond is one of the favourite routes for retail investors looking to take exposure in gold. There is a dual benefit in investing in SGB as investors stand to gain 2.5% per annum fixed interest on their investment and the rise in the value of gold once the bond is redeemed," said Nish Bhatt, Founder & CEO, Millwood Kane International.

Additional fiscal stimulus by the incoming administration at the White House, global economic recovery, and the speed of the vaccination process will guide prices of gold, he added.