Gold prices in India reacted on Thursday following a fall in international markets as news came in that the U.S. Federal Reserve said it would slow its bond purchases this year. Also, traditionally, June onwards, domestic demand wanes owing to lack of any festive buying till Diwali.
On the multi-commodity exchange (MCX) late on Thursday, gold was trading at Rs.27,074 per 10 gram, having reacted by Rs.937 from the previous close. International gold was around $1,300 an ounce, a drop of $75 an ounce.
Market watchers believe the stringent measures put in place by the government and the Reserve Bank of India (RBI) to reduce gold consumption in a bid to address the high current account deficit (CAD) have also begun to bite.
C. P. Krishnan, Wholetime Director, Geojit Comtrade, a commodity trading outfit, felt that international gold had lost the support level of $1,320 an ounce and at $1,280, it could go into free fall.
“Owing to the rupee having depreciated so much, the domestic price fall has been moderated, else it would have been much more”.
Gold actually recovered from its low in April this year largely due to buying from India and China.
“Although prices are almost at a similar level this time around, the enthusiasm is waning and buyers may postpone buying which could lead to a further fall,” Mr. Krishnan said.
Gold has continued to be weak and seems to be losing fancy, according to Suresh Hundia, President-Emeritus, Bombay Bullion Association. He said, “in the domestic market, demand for physical gold has fallen because we are neither in the festive nor marriage season. By month-end, it could go to Rs.26,000 levels”.