Gold prices dip to 7-month low amid global sell-off
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Gold prices crashed to their lowest in seven months in India, the world's largest consumer of the yellow metal. This was broadly in line with the global trend as heavy selling continued across markets. Gold prices have fallen nearly 10 per cent in India from the record high in November 2012.
On Thursday, prices closed at Rs 29,220 per 10 gram (99.5 per cent purity) and Rs 29,355 (99.9 per cent purity). Silver prices (spot) too fell sharply and dropped by Rs 960 to close at Rs 54,735 per kg, continuing with losses in the last two sessions due to low demand by coin makers and industrial units. While bullion traders blamed heavy selling in the US for the crash, analysts say this is a combined effect of the US Federal Reserve's debate on clamping down on the stimulus and a potential move by the Chinese government to curb speculation in real estate.
Global markets were spooked after the US Federal Reserve suggested it may have to go slow or completely stop buying bonds and indications of continued sluggishness in the Eurozone data from the Purchasing Managers Index for the region. "Gold prices are at roughly the same level as last year but seem more expensive in the domestic market due to the weaker rupee as well as the higher import duty," said Suresh Hundia, president emeritus, Bombay Bullion Association.
He predicted that prices will dip further over the next few days, with gold likely to settle at Rs 28,500 per 10 gram and silver at Rs 52,500 per kg by the next week.
But with anticipation that finance minister P Chidambaram may hike the import duty on gold further when he presents the Budget 2013-14, analysts believe that prices of gold may harden in the domestic market over the next few days. Falling global prices complicate matters for the government, which could prompt it to take more action in the Budget.