Gold prices slip 4% in Mumbai

Settle at Rs 9,500 per 10 gm, down by Rs 275, in Zhaveri market

Despite bullish outlook and profitable investment opportunities, investor interest for infusing fresh funds in gold is going southward, thereby raising doubts whether the upward trend will continue. In fact, gold prices today slipped by 4 per cent or Rs 275 to settle at Rs 9,500 per 10 gm in Zhaveri market, Mumbai. A similar trend was witnessed in the overseas market as well, where the yellow metal slumped to $625 an ounce, intra-day.

Gold price for the June delivery plunged by Rs 144 to Rs 9,427 per 10 gm from Rs 9,571 per 10 gm on the Multi Commodity Exchange of India. Gold futures for the August delivery nose-dived by Rs 208 to Rs 9,681 on Thursday.

According to Suresh Nair, vice-president, Kotak Commodity Services, the gold price may fall to $620, if the US non-farm payroll remains flat, but this short-term correction will ease out soon. "The current decline in gold prices is the consequence of overall downward sentiment. Commodities, today, are passing through a corrective phase and gold is no exception," a trader said.

Industrial commodities and investment options are affected badly by cross-asset selloffs, which are becoming frequent and a common feature in today's volatile market, sparked by a strengthening dollar and a weaker yen.

India, the largest consumer of gold, usually witnesses lower demand for the precious metal and, hence, the weakening of its price during June-July, as the period is neither in the marriage season nor in the festival season. "The price is close to the bottom level and, hence, one cannot predict a further decline now," said Bhargav Vaidya of B N Vaidya and Associates.

Although India projects a huge surge in jewellery exports to the US and neighbouring countries, demand for gold is expected to remain range-bound as the consumption of gold in jewellery has been stagnant. Given lower margins due to volatile prices, traders have slowed down their interest in precious metals.

The dollar gained, as traders were betting big that the Federal Reserve would keep raising interest rates, after minutes of its latest meeting were released on Wednesday. Meanwhile, gold has shed 11 per cent from a 26-year high of $730.40 an ounce reached on May 12.

Another reason why gold prices fell is that the precious metal's appeal as a hedge against inflation and a safe haven asset also fizzled out, an analyst said.