Gold witnessed the second-largest fall ever in the Mumbai bullion market on Wednesday as a result of the rupee appreciation and weak cues from overseas.
In Zaveri Bazar, the hub of yellow metal trade in Mumbai, standard and pure gold plunged by Rs 630 each on Wednesday to close at Rs 12,795 and Rs 12,855 per 10 gm respectively. On March 20, the precious metal had set a record decline after dropping by Rs 905 per 10 gm following a global economic downturn and a fear of dwindling demand for the yellow metal.
The rupee appreciated by 65 paise against the dollar to close the day at 42.09.
In London, gold for immediate delivery recovered in the afternoon trade after falling below the resistance level of $930 an ounce (oz). It recorded an overall fall of 1.3 per cent at the close of afternoon trade at $934.20 an ounce.
"A Further decline cannot be ruled out on easing tension in Iran, indications of a recovery in the US economy, the dollar's rebound and low crude oil prices," said an analyst. If gold falls by another $20, it will go below the $900 mark, the analyst added.
The yellow metal had advanced by 12 per cent this year, with the price surging to $988.02 an ounce on July 15.
"A dramatic appreciation in the Indian currency can be largely attributed to this fall as the metal has maintained its strength globally. Buyers are still interested in the metal as it is a safe haven for investment," said Bhargav Vaidya of BN Vaidya & Associates.
Gold for August delivery dropped $13.70 to $934.80 an oz on the Comex division of the New York Mercantile Exchange. Crude oil futures declined for a second day, falling by as much as 2.1 per cent to $125.77 a barrel after hitting the lifetime high of $147 early this month.
Crude oil and gold move in tandem. Thus the future of gold would be decided when the US releases the crude oil data late this evening.
Despite higher prices, the demand for gold in the domestic market remained satisfactory. But this kind of turmoil may hamper the demand where consumers may wait in anticipation of a further decline, a trader said.
