Gold hits 3-1/2 month low on heavy selling, silver also slips

Gold prices took severe beating and plummeted to nearly three-and-a-half-month low at the domestic bullion market today as traders and stockists dumped the shiny metal for fear of a steep slide in overseas markets.
Silver also tanked under intense selling pressure and subdued industrial demand.
Standard gold (99.5 purity) slumped by Rs 275 to finish at Rs 26,575 per 10 grams from Wednesday's closing level of Rs 26,850.
Pure gold (99.9 purity) also dropped by similar margin to end at Rs 26,725 per 10 grams against Rs 27,000 previously.
Silver (.999 fineness) dropped by Rs 220 to conclude at Rs 41,510 per kg from Rs 41,730 yesterday.

Globally, the yellow metal took a dramatic plunge to hit an eight-month low in overnight trade following frantic unwinding from bullion-backed exchange-traded funds as well as speculative investors amid a strong dollar after the Federal Reserve brought slightly forward its outlook for rising benchmark interest rates.

However, the US central bank, in its monthly policy statement, vowed to maintain its key interest rates near zero for a "considerable time" citing weakness in recent economic data and sluggish labour market.
It also slashed further its bond-buying programme to USD 15 billion a month and indicated quantitative easing will end in October.

Spot gold was sharply lower at USD 1,224 an ounce in early European trade.
Gold has seen a spectacular rally in the last few years due to a wave of liquidity injected by easy monetary policy of world central banks, especially the US Federal Reserve. The shiny metal conquered an all-time high of USD 1,936 an ounce in 2011.