Gold slumps to four-year low, but retail consumers await further drop

Silver at a five-year low in local currency as global prices head southward

The price of gold fell to a four-year low at Zaveri Bazaar here on Friday, to below the benchmark Rs 25,000 per 10g following a sustained decline in global markets. Silver also slumped to nearly a five-year low in local markets, to Rs 34,200 a kg, a level not seen since September 2010.

Standard gold is currently Rs 24,970 per 10g, despite a marginal depreciation in the rupee against the dollar. Gold in domestic markets has fallen six per cent in July alone, following a similar move abroad. Gold has lost its safe haven appeal in recent weeks due to growing investor confidence towards the United States treasury. Analysts are expecting the US Federal Reserve to raise interest rates in September. Janet Yellen, its chief, had recently said the economy was growing satisfactorily.  “Gold in the domestic market is purely following the global movement,” said G Thiagarajan, Director, Commtrendz Research.

Gold abroad has fallen by 7.5 per cent from its recent peak of $1,169 an oz on July 1. So far this year, it has fallen 16 per cent from a 2015 peak of $1,293 an oz on January 21. In London, it is $1,081.2 an oz, marginally above the five-year low of $1,077 an oz.

India Ratings says the domestic price is likely to range between Rs 20,500 and Rs 24,000 per 10g from the current levels, following its range in the global markets between $900 and $1,050 an oz. The local price was Rs 28,400 per 10g on January 21.

“But, retail consumers are sceptical. They are holding on fresh orders. There was a good footfall when the price slipped from Rs 26,000 per 10g but then, demand disappeared suddenly as bullion dealers are expecting a fall to Rs 24,000 per 10g, which looks a possibility, looking at global markets,” said Kumar Jain, partner, Umedmal Tilokchand Zaveri.

India Ratings’ Deep N Mukherjee, senior director, corporate ratings, thinks it is one of the rare occasion when gold and the dollar would move in the same direction.