 "Global gold prices fall to five-year low")
The price of gold in global markets fell to a five-year low in early trade on Monday to below $1,100 an ounce. If then saw a sharp recovery from lower levels on buying from Indian jewellers and short recovery. At the bullion market here, standard gold fell by Rs 370 to close at Rs .25,550 per 10g.
The fall in gold was triggered by sharp recovery in the dollar. The dollar index was trading above 98.9 in the morning on hope of a rise in interest rates by the US Federal Reserve at its next meeting in September. However, later, the index saw some profit taking by bulls and fell to 97.9. Gold was trading at $1,112 an oz, recovering from the day's low of $1,072.35 in the morning. Silver also fell but in India by only Rs 170 to Rs 34,550 a kg.
China disclosed on Friday that it had added 604 tonnes of gold in the past six years to its foreign exchange reserves., less than anticipated by market players. On the Multi Commodity Exchange (MCX), gold went low at Rs 24,904 per 10g as compared to Rs 25,498 per 10g on Friday. By the evening, it was trading at Rs 25,138, down 1.4 per cent. Many traders on the MCX were carrying short positions in gold in recent days and since early July, their open interest (unsettled contracts at the end of a trading day) went up by 20 per cent to 11.998 tonnes last Friday. The OI fell 1.7 per cent on Monday, to 11.788 tonnes.
Apart from fresh import orders by Indian banks in the international market, many jewellers were buying for replenishing gold under lease. Jewellers take gold on lease and return that in six months, paying a four per cent lease rate. It makes sense to return old loans and take fresh ones, as the price difference for a gold loan is $80-100 an oz for many.
Going forward, “Gold markets will continue to remain fixated on a US interest rate hike. Prices should find some support from the cost of production dynamics and the ongoing theme of diversification of investments and reserves. However, after the initial rate normalisation jitters, the environment will likely be far more positive for gold,” said Chirag Mehta, senior fund manager with Quantum AMC.
The fall in gold was triggered by sharp recovery in the dollar. The dollar index was trading above 98.9 in the morning on hope of a rise in interest rates by the US Federal Reserve at its next meeting in September. However, later, the index saw some profit taking by bulls and fell to 97.9. Gold was trading at $1,112 an oz, recovering from the day's low of $1,072.35 in the morning. Silver also fell but in India by only Rs 170 to Rs 34,550 a kg.
China disclosed on Friday that it had added 604 tonnes of gold in the past six years to its foreign exchange reserves., less than anticipated by market players. On the Multi Commodity Exchange (MCX), gold went low at Rs 24,904 per 10g as compared to Rs 25,498 per 10g on Friday. By the evening, it was trading at Rs 25,138, down 1.4 per cent. Many traders on the MCX were carrying short positions in gold in recent days and since early July, their open interest (unsettled contracts at the end of a trading day) went up by 20 per cent to 11.998 tonnes last Friday. The OI fell 1.7 per cent on Monday, to 11.788 tonnes.
Apart from fresh import orders by Indian banks in the international market, many jewellers were buying for replenishing gold under lease. Jewellers take gold on lease and return that in six months, paying a four per cent lease rate. It makes sense to return old loans and take fresh ones, as the price difference for a gold loan is $80-100 an oz for many.
Going forward, “Gold markets will continue to remain fixated on a US interest rate hike. Prices should find some support from the cost of production dynamics and the ongoing theme of diversification of investments and reserves. However, after the initial rate normalisation jitters, the environment will likely be far more positive for gold,” said Chirag Mehta, senior fund manager with Quantum AMC.