Gold rate today: Yellow metal gains marginally; volatility likely ahead

Gold prices continued to trade on a volatile note as hawkish comments from US Fed policymakers pushed traders to trim positions while fall in the US dollar kept the downside checked.

On Thursday, gold futures erased early losses and rose marginally or 0.06% to trade at Rs 56,317 on MCX.

Earlier in the week, gold hit a record high of Rs 56,317 before retreating downwards. The fall from record highs was mainly due to profit-taking by short-term futures traders, while a rebound in the dollar index and falling crude oil prices have also capped gains.

In the international markets, spot gold fell but stayed above $1,900 per ounce after erasing gains. Meanwhile, the dollar index fell marginally to 102.3 levels.

Analysts expect volatility to continue in today's session as well.

"The US data was mixed for bullion prices but weakness in the global crude oil prices and recession fears in the US triggered profit-taking in gold and silver," said Rahul Kalantri, VP-Commodities, Mehta Equities.

"We expect gold and silver to remain volatile in today’s session. Gold has support at Rs 56,080-55,780, while resistance is at Rs 56,580 and 56,710. Silver has support at Rs67,650-67,180, while resistance is at Rs68,720–69,080," he added.

A Federal Reserve report released on Wednesday noted that the economic activity in the US remained lukewarm in recent weeks, with expectations of "little growth in the months ahead."

Meanwhile, the US economic data showed retail sales and producer prices declined more than expected in December. Also, production at US factories fell more than expected in December and output in the prior month was weaker than previously thought.

Even though traders are now betting on a 25-basis point rate hike in February, Federal Reserve officials James Bullard and Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

The Fed commentary also highlighted the disparity between the US central bank's estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June.

In the global markets, gold prices are expected to rise towards record highs above $2,000 an ounce this year, although with a little turbulence, as the Fed slows the pace of rate hikes and eventually stops increasing them, according to industry analysts. Since gold is a zero-yielding asset, lower rates tend to be beneficial for gold as they reduce the opportunity cost of holding the asset.

Meanwhile, on Thursday, silver prices were down 0.36 % to trade at Rs 67,982 on MCX.

(With inputs from agencies)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)