Gold Price Slump in India; Down by Rs 400 for 22 Karats

The gold prices slumped in India on Friday's trade session as it traded at a three-month low amidst hawkish comments from the Fed Chief. The gold rates in India are down by Rs 400 for 10 grams of 22 karats and traded at Rs 54,100. The price of 24-karat gold stood at Rs 59,020 for 10 grams, down by Rs 430.

The gold price in India follows trends from the bullion markets. Any rise or fall in the gold rate in the international markets will have a direct impact on the prices of yellow metal in the local markets in India.

On Wednesday, the U.S. Federal Reserve Chairman - Jerome Powell said at the Congressional hearing that the U.S. Central Bank expects to continue raising interest rates but to slow down the pace of hikes. He told the House Committee of Financial Services "Given how far we have come; it may make sense to move rates higher but to do so at a more moderate pace".

The metal declined nearly 1 per cent in the bullion markets as it traded at a three-month low, as the second day of the U.S. Federal Reserve Chair Jerome Powell's testimony is underway.

The growing expectations of a more rate hike in the coming days have led to a drastic fall in the gold rates in the international and in turn in the Indian markets. Here the rising interest rates will adversely impact gold prices as it prompts investors to jump choosing other forms of investment like stocks, bonds, fixed tenure investments or any other government-backed investment avenues ditching gold.

Meanwhile spot gold declined today by 0.9 per cent to trade at $1,914 an ounce and U.S. gold futures were down by 1 per cent and stood at $1,925 per ounce.

Navneet Damani, Senior VP of Commodity Research at Motilal Oswal Financial Services said: 'Gold witnessed some recovery after a sharp correction in the past few sessions, as prospects of additional interest rate hikes by the U.S. Federal Reserve this year weighed on billions.

Governor Powell in his second day of testimony said the U.S. central bank would move interest rates at a "careful pace" from here as policymakers edge towards a stopping point for their historic round of monetary policy tightening. U.S. jobless claims, meanwhile, held steady at a 20-month high last week, potentially signalling a softening labour market in the face of the Fed's aggressive rate hikes.

The BoE raised interest rates by 50bps twice more than forecast - saying it needed to act against "significant" indicators that British inflation would take longer to fall. U.K.'s main interest rate is now at 5%. Ease off in the market uncertainty along with further rate hike expectations are sharply weighing on the gold and silver prices.

Meanwhile, Japan's core consumer prices in May rose 3.2% from a year earlier, data showed on Friday, while manufacturing and service activity slowed. Focus today will be on the US preliminary manufacturing and service PMI data.'