Mumbai: In a major relief to consumers during the ongoing festive season, the prices of gold cracked almost Rs 900 per 10 gram, its biggest fall in 2016 following a sell-off in global markets amidst expectation that the US Federal Reserve would hike interest rates sooner than expected.
Gold prices fell by as much as Rs 900 to Rs 30,000 per 10 gram in Mumbai as compared to its previous day’s close of Rs 30,900 per 10 gram.
Sources in the industry pointed out that few retail jewellers even opened their shops little late for the prices to recover and stabilise. The prices of silver also suffered a similar fate falling Rs 1,500 to Rs 43,000 per 100 grams.
According to bullion experts, the yellow metal witnessed heavy selling in the international market as soon as its price fell below $1,300 per ounce.
On Tuesday, the prices of the yellow metal slumped 3.26 per cent to close at $1,268 per ounce in New York. “A lot of traders had kept stop losses just below $1,300 per ounce in the futures trading. Once the stop losses got triggered, tra-ders created fresh short positions in the futures trading,” said Mukesh Kothari, director, RiddiSiddhi Bullion Ltd.
While the buying activity had largely remained robust during the past few days, the steep fall in prices on Wednesday, according to Mr Kothari, had actually confused buyers.
“Gold buying remained little subdued on Wednesday compared to Tuesday as consumers have adopted a wait-and- watch approach. I think '29,500 per 10 gram would be a good opportunity to buy as the current prices have mostly discounted a rate hike by the US Federal Reserve and the resulting strength in the US dollar,” he added.
The prices of gold and the US dollar have an inverse correlation. An interest rate hike by the US Federal Reserve is expected to strengthen the dollar against major currencies in the world.
Dinesh Jain, director of PM Shah Jewellery and member of the All India Gems and Jewel-lery Trade Federation, believes that the current fall in gold prices would provide an additional boost to the festive season demand.
“The price correction has come at the right time. Our Navratri business has just started and our order book position is also quite robust this time. We are expecting a very good growth in both the gold jewellery and diamond jewellery business in this year,” Mr Jain added.
