After a robust opening in the wake of bullish global sentiments, precious metals plunged in the afternoon trade at Zaveri Bazar here on Tuesday, following profit booking in overseas markets.
Standard gold opened at a record high of Rs 28,660 per 10g on Tuesday but slipped to close the day at Rs 28,170 per 10g, a marginal rise of Rs 10 from the previous day’s close. Similarly, silver opened higher at Rs 65,900 a kg, only to sustain this level for a while. Later in the afternoon, the white precious metal fell steeply to close Rs 815 a kg below the previous day’s level, at Rs 64,580 a kg.
The precious metals followed the global trend. In London, spot gold hit $1,920 an oz early on Tuesday and fell later to $1,884 an oz. Towards the close, the metal was hovering around $1,892.3 an oz. Similarly, silver remained volatile through the day to trade in a range between $43.15-42.13 an oz.
“The volatility is likely to continue as long as uncertainty in global economy prevails,” said Bhargav Vaidya, an analyst with B N Vaidya & Associates. In New York, gold futures jumped on Tuesday in line with gains in Europe, after the Swiss decision to peg its currency to the euro due to worries over economic growth.
Investors are seeking refuge in gold against other asset classes. Gold is up 33 per cent so far this year, outperforming global stocks, commodities and treasuries as investors bought more bullion and central banks added to their reserves for the first time in a generation.
The dollar has shed five per cent against a basket of six major currencies, including the euro and pound, while treasuries returned 8.1 per cent this year. Still, potential in gold is higher for long-term investors.
However, traders are favouring silver over gold to park their fund in metals. “Silver has not performed in proportion to gold. The white precious metal remained almost range-bound since the beginning of this year after hitting the highs of Rs 72,000 a kg early this year. We believe silver would surpass Rs 100,000 a kg by December,” said an analyst with a city-based reputed research firm.
It was the 12th record high that spot gold has reached since the beginning of August. The rally is expected to continue, with investors unable to see a quick resolution to the euro zone crisis and the global economy at risk of slipping into another recession.
“The recent report on a bank’s collapse in Europe has also made some dent to gold prices,” said Vaidya.
Investors are watching a string of legal and political events in the Europe this week that could hurt efforts to resolve the debt crisis, after a dispute broke between international lenders and Greece over disappointment that Athens had fallen behind schedule on cutting its deficit.
In contrast, some analysts warn of a steep decline in gold prices as major short-term investors may book profits on highs. Gold prices may slump as much as 30 per cent from a record as the dollar “outperforms” its counterparts, damping demand for bullion as an alternative currency, Stanley Crouch, the chief investment officer of Aegis Capital Corp, said.
Meanwhile, physical demand from China and India, the world’s two largest consumers, remained high as jewellers have started booking afresh for preparing jewellery designs for upcoming festive seasons in the US like Christmas and the New Year.
