Local gold close to two month-low

Mumbai spot gold slumped to a near two-month low today tracking the weakness overseas, where rates fell as hedge funds exited positions from the yellow metal, dealers said.

Today, pure gold in Mumbai opened at Rs 8,500 per 10 gm, down Rs 200 from close Wednesday and closed at Rs 8500. Standard gold opened 205 rupees down at Rs 8,445 per 10 gm and closed at Rs 8535.

"Gold prices have fallen as hedge funds are shifting their focus to stocks," said Si Kanan, analyst at ShareKhan Commodities.

Wednesday, Dow Jones Industrial Average closed at its record high and the S&P 500 touched its best level in over five-and-a-half years.U.S. stocks rallied as the Federal Reserve chief acknowledged a housing slump raising hopes the Fed may start slashing interest rates next year.

"In the beginning of every quarter of the year, hedge fund managers in U.S. usually re-allocate funds. They are now finding stocks to be more investment attractive than commodities and thus are withdrawing from gold and other commodities," he added.

Also, slowing of economic growth in U.S. has started to ease inflationary fears, which in turn has made gold loose its allure as an anti-inflationary hedge, dealers said.

Last week, the U.S. GDP data rose at a 2.6 per cent annual rate against market expectations of 2.9%.

Also, gold prices have been getting very little support from crude oil prices, which tumbled on Wednesday after U.S. crude stockpiles rose an unexpected 3.3 mln barrels and traders shrugged Kuwait's decision to join other OPEC countries in trimming supplies.

"Overseas spot gold would largely trade in $555-575 an ounce range today," a bullion dealer at a private-sector bank said.The fall in prices cheered jewellers and bullion dealers across the country ahead of Diwali, which falls on Oct 21.

Mahendra Bafna, manager, RiddiSiddhi Bullion said, "The fall in prices today would definitely attract customers. According to me, sales across the country should be around 10 tonnes."

In the past 15 days, around 150 tn of gold has been sold in Mumbai, dealers in Mumbai's Zaveri Bazaar said.