Gold snaps 4-day winning streak; declines ₹800 to ₹98,500
Gold prices declined ₹800 to ₹98,500 per 10 grams, bringing an end to its four-day rally, in the national capital on Tuesday amid a fall in precious metal rates globally, according to the All India Sarafa Association.
The yellow metal of 99.5 per cent purity depreciated ₹800 to ₹98,000 per 10 grams (inclusive of all taxes). It had closed at ₹98,800 per 10 grams in the previous market session.
Additionally, silver prices plunged ₹1,370 to ₹99,000 per kg (inclusive of all taxes) on Tuesday. The white metal had settled at ₹1,00,370 per kg on Monday.
On the global front, spot gold slipped by USD 45.03 per ounce or 1.35 per cent to USD 3,296.92 per ounce.
"Gold is trading below USD 3,350 per ounce, weighed down by Brussels' push to accelerate trade negotiations with the US, reducing demand for safe-haven assets," Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, said.
Investors are now focused on upcoming US Durable Goods Orders and Consumer Confidence data later in the day for further insights into the economic outlook amid persistent tariff and inflation concerns, Chainwala added.
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The Print
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Ahead of anticipated talks between the US and China towards a trade deal, as well as the prospect of a trade deal with Taiwan, Asian currencies rallied against the dollar as part of the Sell America wave, which we explained in the May 5 Tariff Tracker. In early May, the HKD value breached the 7.75 mark four times on three days, according to the HKMA. Thus, the authority sold HKD129.4 billion in exchange for USD16.7 billion, following the LERS mechanism. According to a Bloomberg report, this had been its first such intervention in five years – the HKMA in 2022 and 2023 moved to sell the USD when its currency was depreciating ($1 > 7.85 HKD). The base rate set by the HKMA is also linked to the US Federal Reserve's policy moves. However, the gap between the HK base rate and US interbank rate has widened to its largest since 2018, Nikkei Asia reported. The Secured Overnight Financing Rate (SOFR), a US interbank benchmark rate, is currently in the 4.3% range, while the corresponding Hong Kong Interbank Offer Rate (HIBOR) is at about 0.5%, its lowest level in three years, the report said. The HKMA's purchase of USD reserves increased liquidity in the market as HKD supply increased, and with it, interest rates in Hong Kong fell sharply. The HIBOR fell by about 3% since May 2, the Nikkei report said. So what seems to be the problem? The FT column expressed concern about how this interest rate gap has persisted, with no sign of letting up. Ordinarily, investors would respond to such a scenario by opting for a carry trade, in which they borrow funds at the lower interest rate and invest in the currency with the higher interest rate, to profit from the interest rate differences between the two countries (arbitrage). This has thus far not happened. The fallout of US President Donald Trump's shifty tariff policies has resulted in a wider shift away from the US dollar. Since May 2025, Asian currencies, including the South Korean won, Japanese yen and Singapore dollar, have appreciated against the US dollar. The FT report highlighted two major issues: * One, the extreme caution taken by banks and hedge funds in responding to the arbitrage opportunity. Given the general back-and-forth on tariff announcements, these organisations have become risk-averse to the possibility of what could be considered 'easy money'. * Two, a declining trust level in American assets by Asian investors. The FT report cited the contentious Section 899 of the One Big, Beautiful Bill, currently in US Congress, which threatens higher taxes on foreign investments. Even if this clause may not see the light of day, the general unpredictability has made potential investors wary. What does this mean for Hong Kong? Hong Kong authorities have welcomed the low interest rates, Nikkei Asia reported. Lower interest rates help to boost consumption spending and mean cheaper borrowing, especially on items like housing mortgages. Further, the downward trend in property prices, underway since 2021, may finally be arrested, with major local real estate companies already witnessing a recovery in their stock prices, the Nikkei report said. However, this trend is likely temporary and would come to a halt once the HKMA intervenes to arrest the depreciating HKD value, which in turn would reduce liquidity and temporarily increase the HIBOR. There are other factors at play as well. In its latest policy note on June 19, the HKMA noted that the HKD had been strengthening for months before the tariff announcements. The note drew attention to the 'buoyant capital market activities' by Chinese investors in the Hong Kong Stock Exchange, which helped its stock market index, the Hang Seng Index, gain 10% in the first four months. Further, dividend payments by listed companies in May and June also helped boost the HKD demand. The HKMA has asserted that the LERS is working as it is expected to, and that the fluctuations in the HKD are all part of the system.
