Gold slumps to five year low, silver to six-year bottom

Retail jewellery demand revives, jumps 20-30% in 3-4 days

Gold prices hit a five-year low in the benchmark Comex trade on Friday, the fourth successive week of a bearish close, following positive economic outlook forecast by the United States Federal Reserve. Silver prices followed suit, nosediving to a six year low.

The yellow metal slumped to $1130 an ounce on Friday in the Comex division of the New York Mercantile Exchange. In late London trade, however, gold recovered marginally to close at $1136.2 an oz. Gold’s current level of $1130 an oz was earlier seen in May 2010.

Silver, too, recovered marginally to close on Friday at $14.91 an oz after falling to $14.90 in early London trade, a level not seen since 2009.

In Mumbai’s Zaveri Bazaar, the busiest bullion and jewellery market, gold and silver eased further to trade Rs 25690 per 10 grams and 34500 a kg respectively. Gold, however, continued to trade in most market at a discount of $2.5 an oz compared to its imported cost.

“Last week, US Federal Reserve chair Janet Yellen confirmed that the US Fed would raise interest rate this year which cleared earlier doubts. Thus, pressure continues on bullion. In that backdrop gold would continue to fall,” said Gnanasekar Thiagarajan, Research Director, Commtrendz.

Weak trend persist in the precious metal segment since 2013 after the US Fed reported a recovery in its economy. Early this week, too, the US Fed chair Janet Yellen hinted that the US economy is recovering as per expectations, which suggested that a proposed interest rate hike may be possible this year itself.

Interestingly, the US dollar hit one month high on Friday to 1.08 against the Euro on positive economic outlook in the United States which is expected to rebound investors’ trust towards the US treasure resulting into emergence of dollar demand.

Kumar Jain, Director of Umedmal Tilokchand Zaveri, forecasts gold price to fall further to $1070 in coming months.

The fall in gold prices has revived jewellery demand with consumers gradually rushing to book their piece before gold price revives.

“With falling gold prices, retail jewellery demand would surge,” said Rajesh Mehta, Managing Director, Rajesh Exports, one of the largest jewellery retail chains in India.

As a result of gold price fall, Jewellers have witnessed 20-30 per cent surge in retail jewellery demand in the last 3-4 days.

Meanwhile, silver price is unlikely to fall as severe as gold. According to Thiagarajan, fundamentals support would protect silver price from steep fall.

Following the move of precious metals, platinum slumped below $1000 an oz to settle at $997 an oz on Friday, the level not seen since February 2009.

Trade sources estimate India's gold import to have declined by 37% to $1.96 billion in June and forecast to fall further in July due to the perennial weak demand during the ongoing monsoon season.