A weak euro and political uncertainties in the euro zone have led to a significant drop in gold prices in international markets. The yellow metal fell 3.1 per cent to $1,587.4 an ounce, from $1,638.5 on Monday. In Mumbai, the metal lost 1.7 per cent in two days to close at a three-week low of Rs 28,550 per 10g on Wednesday. Similarly, silver lost three per cent in the domestic market to close at Rs 54,350 a kg in the Mumbai market. A weak rupee curtailed the decline in domestic markets.
Market sentiment was overshadowed by the political events in Europe, with the French and Greek election results increasing uncertainty in the financial markets. Analysts say the new electoral round in Greece would only add to the political uncertainty at this stage, as none of the three largest parties seem likely to be able to secure parliamentary support for a coalition government. US equity markets weakened, while the euro fell against the dollar. In turn, precious metals, including gold, suffered hefty losses and technical levels were breached.
Positive news from India —the excise duty on jewellery being rolled back — failed to perk up the market. A Barclays analyst said: “The physical market has provided a fragile floor for gold. The volume traded on the Shanghai Gold Exchange has remained lacklustre and whether or not the appetite from the physical market responds to lower prices in the forthcoming sessions will be key.” “Gold is usually seen as a safe haven commodity, but, in the last few months, it has been moving in the opposite direction, in the direction of the equities markets,” said Naveen Mathur, associate director of commodities and currencies at Angel Broking, a Mumbai-based broking firm.