Gold may fall 3-5% on US rate hike worries

Gold prices may fall 3-5% in the short term amid expectations that the US Federal Reserve will increase interest rate at the next meeting of the Federal Open Market Committee on March 14-15, bullion traders and analysts said. The probability of a rate hike stands at more than 80% according to the Fed Fund Futures, said Prathamesh Mallya, chief analyst for non-agricultural commodities and currencies at Angel Broking.

“Trump’s policies regarding immigration and infra spending will take a back seat. His earlier announcements have already moved gold prices nearly 10% since the start of the year. Also, geopolitical tensions emanating from North Korea will not have any impact on gold for the time being,“ Mallya said. On the MCX, gold had touched a high of Rs 29,785 per 10 gm on February 27. Since then it has fallen nearly 3%. On Tuesday afternoon it was trading at about Rs 28,910 per 10 gm.

In the physical market, gold was available at Rs 29,400 per 10 gm. “If the interest rate is hiked by Fed then prices of gold may drop to Rs 28,000. 28,500 per 10 gm. But if the North Korea issue escalates then the price may cross Rs 30,000 per 10 gm and move upwards,“ said Mukesh Kothari, director, RiddiSiddhi Bullions. Haresh Acharya, secretary of Bullion Federation said that demand for gold is picking up in rural India.

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