Gold nosedives Rs 250/ 10 gm

Weak wedding season demand, global trend cited as reasons

Domestic precious metals' prices are witnessing a fall with expected wedding demand not picking up despite the weakness seen in overseas prices.

"Prices are weak not just because of fall in overseas prices. Further, wedding season demand is negligible. It seems hoarded gold is out this season more than expected," said Suresh Hundia, director, Hundia Exports and former president of the Bombay Bullion Association.

Spot gold today ended Rs 250 per 10 grams lower at Rs 10,250 compared with Rs 10,500 yesterday. Spot silver ended Rs 600 per 1 kilograms lower at Rs 19,400 compared with Rs 20,000 yesterday.

The fall in prices was in line with a similar trend overseas. At 1800 IST, overseas spot gold traded at $ 669.6 a troy ounce, a fall of $11.8 and silver traded at $12.46 a troy ounce, a fall of $0.19.

Overseas prices of precious metals are witnessing weakness following easing of US inflation woes.

Market players, however, see this as a temporary phase as weakness of greenback against other major currencies like euro and yen is likely to continue, crude oil prices are seen rising in the long term, rising US inflation woes and escalation of tension in middle-east. These factors are expected to keep gold and silver prices bullish.

Today's domestic demand in gold was about 650 kilograms compared with an average wedding season demand of 1-1.2 tonne, said a Mumbai-based trader.

Following phenomenal volatility, gold and silver domestic demand for fresh sale has been hit by about 35 per cent. For instance, "six months ago, if on an average day, banks were importing gold worth $40-50 million, they are now importing gold worth $1.5-2 million", said T. Gnansekar, a Mumbai-based independent analyst.

"Bearish trend in metals "" precious as well as industrial "" is likely to continue along with volatility. Euro is likely to break its crucial support against the dollar at 1.2750 and any fall below that would lead to a decline," said Si Kannan, senior analyst with Sharekhan Commodities.

Marketplayers expect gold to touch $600 after it breaks the crucial level of $675. Some traders even eye $575-a-troy-ounce level. However, another section of traders feel $675 level to be crucial and expect sideways trade to take place between $675-695.

In case of silver, traders see the price to fall to $12.35 a troy ounce in the immediate term and in a week's time to $11.80. Another section of market players, however, feel that $12.01 is a crucial level and only extraordinary news only can pull it down further.

Silver is the most volatile among precious metals. Further, as it is also an industrial metal and a by-product of copper mining, its price movements are closely linked to industrial metals, especially copper.