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Gold prices fell sharply in the afternoon during London trade due to profit-booking by traders and stockists waiting for clues on US Federal Reserve's monetary policy on Monday.
Gold hit a low of $1,302 an ounce (oz), a decline of $32, before recovering marginally to $1,305 an oz late afternoon. Gold saw a two per cent fall on the Multi Commodity Exchange (MCX). Gold for delivery in August 2014 fell two per cent to trade at Rs 27810 per 10g on the MCX.
"The Fed is moving further on its decision about the exit strategy. As the recent payrolls data released by the United States showed US economy is further picking up pace. Fed chairman Janet Yellen may offer some cues about winding up the bond buying programme in her upcoming semi annual testimony to the Senate and House committees," said Sugandha Sachdeva, metals, energy and currency incharge, research, Religare Securities.
Fed chair Janet Yellen's semi-annual testimony to the Senate and House committees on Tuesday will be crucial to the US economy. Broad expectations are the Fed will discuss an exit strategy for its ongoing bond-buying programme.
"Investments are moving from bullion to equities. Hence, the trend looks sideways for gold's near future due to easing geopolitical tensions," said Haresh Soni, chairman, All India Gems & Jewellery Trade Federation (GJF).
Sachdeva says Finance Minister Arun Jaitley may revisit the import duty on gold. He was expected to do so in the Budget. Markets still expect a cut in the duty from the current level of 10 per cent.
In case of a cut, gold prices may decline in the short term. But these may rebound in the long term on fresh investment coming from new investors, said Sachdeva.
