Gold dips 2% on global cues

Discounting the festive demand, standard gold declined by about 2 per cent in Jhaveri Bazar, Mumbai, on Wednesday because of the falling sentiment in the international market ahead of the US Federal Reserve meet.

The US Federal Reserve's decision on interest rates is likely to determine the direction of gold price next week.

Witnessing its second straight decline, spot standard gold in Mumbai closed at Rs 8,629 per 10 gm on Wednesday as compared with Rs 8,770 per 10 gram on Saturday, the Diwali day. Pure gold, too, slumped by Rs 144 to Rs 8,678 per 10 gram on Wednesday.

The metal metal prices, which had dipped during the muhurat trading on Saturday, had jumped on 'Dhanteras', the auspicious day for buying gold according to Hindu mythology.

The domestic market opened after two days of holiday on a sluggish note, with traders waiting for buyers throughout. "Volume remains very thin soon after Diwali and this is a very common phenomenon," a trader said. The current price decline is mainly attributed to the end of Diwali period, coupled with the price decline in the international market.

Spot gold in London, which opened at $584.50 an ounce, rose to as high as $584.70 before hitting an intraday low of $582.80. On Tuesday, gold was quoted in the range of $583.40-584.90 during the late trading session in New York, but at one point, it had dropped to $573.10, its lowest level in nearly two weeks.

Higher oil prices also supported gold at lower levels to certain extent, but stockists awaited the outcome of the Fed despite expectations the Fed's Open Market Committee would leave interest rates on hold at 5.25 per cent for the third consecutive month.

Despite the festive demand peaking up, seasonal traders are waiting for the price to come down further to the level of $560 in London and Rs 8,000 in the domestic market.

Looking at Opec's decision to curb oil supplies and the UAE's move to slash output by about 100,000 barrel per day, the further decline in gold price is an exaggeration, a trader said.