The decline largely resulted from uncertainty on presidential elections in the US, the largest market for Indian gold jewellery and diamonds
Gold prices fell by about Rs 1,000 in less than a week, primarily owing to the rupee's appreciation against the dollar. In the last three days, the rupee appreciated 2.62 per cent against the dollar due to huge inflows from foreign investors. This made gold imports cheaper. The moderation in international prices added to the fall in prices.
From an all-time high last Monday, standard gold prices fell 3.77 per cent (Rs 1,225) to Rs 31,275 per 10 gm, while silver prices fell 2.51 per cent to close at Rs 62,735 a kg in the Mumbai spot market on Saturday. While the local money market was closed on Saturday, gold fell due to a fall in international prices on concern on a fiscal cliff in the US.
Worries over the fiscal cliff, increasing by the day, saw gold prices fall during last week. The Euro zone's second round of aid for Greece reduced the safe-haven appeal for gold, dragging prices down. However, concern US lawmakers might fail to reach a settlement over tax cuts prevented a steep fall.
Prithviraj Kothari of Riddhisidhi Bullion said, "Prices have corrected significantly in the last couple of days and these would hit the bottom at Rs 30,000-30,500 per 10 gm which, if it sustains, would draw buyers back to the market." Yesterday, there were 30,000 marriages in Mumbai alone. Across the country, too, the number of marriages recorded was high. Kothari said the demand for gold due to marriages would be sustained. He added there were five million marriages in the country during a year, and these kept the demand for gold high.
An analyst with Emkay Commodities said, "Until any agreement is reached between republicans and democrats in the US, gold would be seen higher, as the safe-haven appeal for it can be seen escalating in the near term." He added he expected gold prices to rise next week on worries on the US fiscal cliff. Also, this week, non-farm payroll numbers could show signs of improvement in the US.
Next week, gold prices in the futures market are expected to stand at Rs 30,900-31,900 per 10 gm, while silver is expected to move in the range of Rs 60,800 and Rs 63,800 a kg.