Gold tumbled by over 5 per cent in the precious metal market here on Saturday following overseas cues, where the yellow metal fell by over 10 per cent in the late evening trade on Friday as bargain-hunters were on the prowl.
Standard gold (.995 purity) nosedived by Rs 685 to close the day at Rs 13,420 per 10 grams, while pure gold (.999 purity) tanked by Rs 675 to Rs 13,485 in Mumbai’s Zaveri Bazar. However, the decline kept consumers away as they expect a further drop in prices. They may resume buying once the price stabilises, probably by Diwali, said analysts.
Gold declined by about $100 to $847 an ounce in overnight trade on Friday. Gold futures for December delivery fell by $19.60 or 2.2 per cent to $866.90 an once on the Comex division of the New York Mercantile Exchange on Friday. The metal had hit an all-time high of $1,033.90 an ounce on March 17.
Gold futures for December delivery on MCX gained 1.22 per cent to Rs 13,445 per 10 grams on Saturday from an overnight low of Rs 13,217 per 10 grams.
The yellow metal had hit a record in the domestic spot market on Friday, touching Rs 14,320 per 10 grams, prompting investors to book profits on Saturday.
“Profit-booking is a part of the overall trade that takes place each time the commodity takes a sharp upward move. On this occasion also, there was nothing exceptional,” said Jayant Manglik of Religare Enterprises, a commodity broking firm.
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Manglik, however, stressed that the price would recover to hit $1,000 on ounce (equivalent to Rs 15,000 per 10 grams in India) in the international market because of strong fundamentals for the yellow metal, which is seen as the only investment option left for hedge funds.
“Nobody wants to talk about equity markets. Investors have lost hope on the housing sector. Currency being most volatile and uncertain, people do not want to burn their fingers there. Other industrial and agriculture commodities and fuels have devoured investors’ money fast. Therefore, investors will have a fair chance to make a quick buck in gold in any form, physical or paper (exchange-trade fund or ETF),” Manglik said.
An Angel Broking report said investors would pick gold for safe-haven buying because of weak macro-economic data from the US and Europe, which, investors fear, may plunge the world economy into recession.