The preference for alternative-safe haven options such as equities and other securities by investors have taken a toll on gold prices, which dropped as much as 6.38 per cent since hitting a life-time high of Rs 32,975 per 10 gm here last month.
In the Delhi market, the precious metal touched a six-week low of Rs 30,870 on Friday, a loss of Rs 2,105, from its life-time high of Rs 32,975 on November 27, tracking a weak trend in the global markets. "An economic uptrend in the US has somewhat dried demand for the precious metal in the global markets as a safe-haven investment," Geojit Comtrade Wholetime Director C P Krishnan told PTI.
In London, prices declined to as low as $1,635.70 an ounce on December 20, after data showed the US economy grew 3.1 per cent during the quarter to September. Global gold prices are likely to fall further to $1,500 in the next few months, which will also affect the local bullion prices, Krishnan said.
To a query on whether the demand for gold will revive due to the current weakening trend of the rupee against dollar, he said the local currency is likely to appreciate up to 50-51 level against the Greenback by mid-2013.
A stronger rupee makes gold imports cheaper and India is a net importer of the precious metal.
Meanwhile, according to a city-based bullion trader, gold prices in India will follow global trends though will mainly depend on the rupee's movement against the dollar. In futures market as well, gold prices are moving downwards. Prices hit a two-week low at the Multi Commodity Exchange on December 19, when February contract rates dropped by Rs 104, or 0.33 per cent, to Rs 30,952 per 10 grams, traders said.
A sluggish domestic demand at prevailing higher levels also contributed to price fall. Some investors were seen shifting their funds from weakening bullion as equity markets have been rising, they added.