Local gold below Rs 9000

The easing of tensions in West Asia and softening crude oil prices caused the gold prices to fall below the Rs 9000 mark in Mumbai.

In Mumbai, standard gold (.995) fell by more than 2.5 per cent since Friday to close at Rs 8,985. On Friday, it had slipped by Rs 270 to close at Rs 9225 per 10 gms.

On July 14, when crude touched a record $78.40 a barrel, the price of gold also turned bullish at $677 an ounce. Gold normally tracks crude oil price.

Now that crude price has fallen below $66 a barrel, gold also followed to touch a low of about $599 an ounce.

The attractiveness of gold arises due to its intrinsic nature as a hedge against inflation as well as a safe haven in times of political crisis. Oil prices have been declining continuously over the past few weeks. Lower prices mean lower inflation, thereby reducing the attractiveness of gold as a hedge against inflation.

"The only factor that would support gold prices in near future is the higher demand from Indian jewellers who need to stock gold before the festive and wedding season begins in October", said an analyst with Karvy.

At the Multi Commodity Exchange (MCX), spot gold was trading at Rs 9,000 per 10 gms, down by over Rs 400 from Friday's close of Rs 9,415. October futures at the MCX fell from Rs 9,326 per 10 gms on Friday to Rs 9058.