Gold eases over 2% seeking direction from Fed

US Fed chair Janet Yellen's semi-annual testimony to the Senate and House committees is set to bring out a direction for US economy on July 15

Gold price fell sharply in the afternoon in London trade due to profit-booking by traders and stockists, who were waiting for  transparency in the Fed tapering policy on Monday.

Gold hit a low of $1,302 an oz, a decline of $32 an oz, before recovering marginally to trade at $1,305 an oz late afternoon, translating thereby to a 2 per cent fall on the Multi Commodity Exchange (MCX).

Gold for delivery in August 2014 fell by 1.93 per cent to trade at Rs 27,810 per 10 grams on MCX.

"The Fed is in exit mode now. Since the recently declared payroll date by the United States showed a recovery in the country's economy, chances arehigh that the Fed would come out with a direction on Tuesday," said Sugandha Sachdeva, Incharge (metals, energy & currency), Research, Religare Securities Ltd.

US Fed chair Janet Yellen's semi-annual testimony to the Senate and House committees is set to bring out a direction for US economy on Tuesday.

Broad expectations are that the Fed will discuss exit strategy for its ongoing bond buying programme for its accommodative monetary policies and associated risks to financial stability.

"Investments are moving from bullion to equities. Hence, the trend looks sideways for near future in gold due to easing geo-political tensions," said Haresh Soni, chairman, All India Gems & Jewellery Trade Federation (GJF).

Sachdeva believes that the Finance Minister Arun Jaitley may revisit import duty on gold which was expected in the Union Budget.Markets still expect a cut in gold import duty by the Indian government from the current level of 10 per cent.

For a short term, therefore, gold price may decline in proportion to the cut in import duty. However, bullion may rebound for long term on fresh investment coming in from new investors, said Sachdeva.