GOLD prices tumbled in the global and domestic markets on the back of a strong US dollar, which registered a three-month high against the Japanese yen after Federal Reserve chairman Ben Bernanke said the US central bank would strongly resist erosion in inflation expectations. The Fed chief’s remarks appear to be convincing more investors that there could be rate hikes this year.
However, the Indian market did not match the fall in prices to the extent of the global market, as the rupee has slid sharply in the last two months. Debjyoti Chatterjee from MAPE Admisi Commodity Research said: “Buying had slowly picked up in bullion markets. However, traders do not expect major price declines shortly.”
The rise and subsequently steep fall in oil on Monday led to the fall in gold prices, traders said. Oil had declined by $4 a barrel in international markets after touching a record $139 on Monday. Oil fell even as the dollar rose on the news that US home sales were positive.
Demand is currently low in India, but is expected to rise after August due to festivals and the onset of marriage season in India. The sharp volatility in gold prices is expected to continue with activities in the currency markets, swinging oil prices and ETF demand on price declines. “Gold and silver have no strength of their own but are following crude,” said Suresh Hundia, president of Bombay Bullion Association. He does not foresee gold prices falling very sharply. “It will move in the range of Rs 11,800-12,600 in the next few weeks,” Mr Hundia said.
Currently, spot gold is around $886 an ounce, while MCX August was at Rs 12,364 per 10 gram. Internationally, analysts peg gold prices to average $885-$905 an ounce in Comex. MCX August gold futures is also expected to hover between Rs 11,850-12,500 per 10 gram.Despite crude oil rising to record levels, gold has not managed to breach the record made earlier in the year.