Gold declined 2.2 per cent on Tuesday, as investors went for profit-booking after seven consecutive days of a rise in its price. Investors were wary of weak demand from retail and bulk consumers, including jewellery stores, following extension of the nationwide lockdown to prevent the spread of coronavirus.
The price of standard gold in the popular Zaveri Bazaar here declined by Rs 1,028 on Tuesday to trade at Rs 46,778 per 10 gram. Silver, too, fell 2.7 per cent to Rs 46,800 a kg. There was no transaction of business due to the closure of shops. A sustained weak demand pulled down the gold price to trade at a discount of Rs 150 per 10 grams in spot sales.
While the exorbitant price has dented retail demand, the lockdown, and thereby closure of factories and jewellery stores, has hit the bulk consumption of the bullion. Though the Centre has granted permission to states to allow the functioning of factories and retail stores with precautions, outlets in red zones are yet to commence operations in full swing, thus paralysing a substantial portion of the jewellery business.
“The temporary decline in the gold price can be attributed to profit-booking. The appreciation of the rupee, which gained 25 paise to 75.66 against the dollar, on vaccine optimism also pulled the gold price down. But, the outlook remains bullish as gold continues to remain a safe haven amid the global economic uncertainty,” said Gnanasekar Thiagarajan, director, Commtrendz.
The global economy continues to contract because of lockdowns and other restrictions in several countries. With the situation is moving from bad to worse amid the sharp increase in new Covid-19 cases, the pandemic has challenged growth in the global economy. For India, Goldman Sachs has forecast its gross domestic product (GDP) to contract by 5 per cent during the financial year 2020-21. Other global agencies, too, have made similar predictions.
The gold price for delivery in June reported a marginal decline of 0.3 per cent in the late afternoon trade on the Multi Commodity Exchange (MCX), but returned to positive territory in the early evening trade. After volatility, the gold price stabilised at Rs 46,720 per 10 gram in the early evening trade, a marginal gain of 0.14 per cent from the previous close. Silver for delivery in July, however, fell 0.06 per cent to trade at Rs 47,670 a kg.
"There is a huge inventory of imported gold with jewellers because of the closure of factories and retail stores. Hence, both retail and bulk demand remains weak. But long-term fundamentals are bullish for gold, with its price likely to hit Rs 65,000 per 10 gram by the end of the current calendar year. With the presidential election in the US due in October and the rising trade tensions between the US and China, gold may find strong support from investors," said Kishore Narne, associate director, Motilal Oswal Financial Services.
The gold price in the international market rose 0.01 per cent to quote at Rs $1,734 an oz on Tuesday. Silver also moved in tandem to record a gain of 0.06 per cent and close at $17.1 an oz.