The biggest ever fall of Rs.1,250 since April 2012
The gold market went into a tailspin on Saturday as prices fell sharply to touch levels not seen since April 2012. In keeping with the declining trend over the last week, gold prices registered their biggest fall ever of Rs.1,250 to close at Rs.28,350 per 10 grams.
The cue came from the global markets, where prices fell by $87 to $1,477 a troy ounce levels on Saturday. The prices of the yellow metal have been falling for the last one week on the back of unfavourable global developments.
Speaking to The Hindu , Suresh Hundia, President-Emeritus, Bombay Bullion Association (BBA), said: “It is a huge fall in price and it follows global developments. There has been overall selling globally by banks and exchange traded funds (ETFs). This is largely because of the optimistic news and data trickling in about an improvement in the U.S. economy.”
“Internationally, investors have been pulling out of gold and opting for property, equity and fixed deposits where the interest rates have improved. In India, over the next few weeks, the price could dip to even as low as Rs. 27,000 per 10 gram levels by month-end,” Mr. Hundia said.
The support in the global market for gold seems to have vanished, C.P. Krishnan, Wholetime Director, Geojit Commtrade, a commodity trading outfit, told The Hindu . “There has been a lot of gold supply vis-à-vis weaker demand in the market after the Cyprus issue. The view is that the improvement in the U.S. economy, coupled with the Euro and Cyprus issues, has led to investors shifting from gold to equities and other investment avenues.’’
The price fall could have been a blessing considering that this is the middle of the ‘Navratra’ festival, a period considered auspicious to purchase gold. However, expectations of a further fall in prices have kept gold buyers at bay, say experts.
Mr. Krishnan felt that there could be some minor correction in the domestic market, as the drop has been so sudden and drastic.
“But clearly the trend is bearish. The domestic price will depend on the rupee-dollar movement. If the rupee remains weak, then gold prices are unlikely to fall further. However, a strengthening of the rupee will see gold fall further and it could go to Rs. 27,200 per 10 gram levels and also internationally gold could go to $ 1,400 per ounce levels by month-end.”