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With the Akshaya Tritiya-related demand for gold ending and the country's central bank announcing measures to restrict import of bullion on a consignment bases, traders have became bearish on the outlook for demand and price.
The spread between June and August MCX gold contracts was Rs 503 for 10g at the beginning of April, a little less than two per cent. It fell to just one per cent or Rs 256 for 10g a day before Akshaya Tritiya. After Akshaya Tritiya, the spread fell to around half a per cent; on Wednesday, it was Rs 140, perhaps a record low. Narrowing spreads of gold futures between two contracts indicates traders are not enthusiastic in the near future about the outlook.
"Gold was never looking so bearish," said an Indian analyst with a foreign research house. He said traders expected a $100 an ounce fall in prices in the coming months.
The spread was as high as Rs 700 a few days prior to the two per cent import duty increase announced in end-January. However, that was also exceptional.
C P Krishnan, director, Geojit Comtrade, said: "A falling spread in futures indicates traders are bearish on gold prices. With Akshaya Tritiya demand over and the government looking determined to curb demand for the yellow metal, traders have became bearish."
He said the fall in gold prices internationally in the past two days was also because India's demand was expected to fall. The country imports 900-1,000 tonnes a year.
On Monday, Reserve Bank of India told banks the import of gold on a consignment basis would not be allowed, unless meant for the genuine requirement of exporters. This is expected to result in at least a 10 per cent fall in demand. Traders say demand will fall from June, a lean month for buying. The price fell Rs 300 for 10g on Monday, the Akshaya Tritiya day; it fell another Rs 270 on Wednesday, to Rs 26,760 for 10g. Silver also fell on Wednesday by Rs 715 a kg, to close at Rs 44,695 a kg here.
PTI adds from New Delhi: Gold on Wednesday witnessed its second biggest loss this year, of Rs 600 to Rs 27,300 per 10g, on reduced offtake amid weak global trends. Silver prices followed and dropped by a massive Rs 800 to Rs 44,700 a kg on reduced offtake by jewellers and industrial units.
Traders said hectic selling by stockists on the back of sluggish demand at the prevailing higher levels and a steep fall in global markets mainly pulled down both gold and silver prices. This is gold's second biggest fall this year since April 15, when it had plunged by Rs 1,160 to Rs 26,640 for 10g.
