Despite strong gains globally, the gold rate today in India fell by Rs. 210 ($2.98) to settle at Rs. 31,850 ($451.9) due to poor demand domestically. The shocking fall in gold prices this Wednesday is a direct result of dwindling demand from local jewelers despite positive demand in the global market. Silver also followed suit by falling by Rs. 435 ($6.18) to Rs. 37,880 ($537.78) due to lower market supply by industrial units.
In global markets gold rose by up by 0.06 percent to $1,250.8 per 28 grams and silver edged up by 0.45 percent to USD 14.77 per 28 grams. Domestically however both 99.9 percent and 99.6 percent variants of gold fell by Rs. 210 to Rs. 31,850 and Rs. 31,700 per 10 grams respectively. Only until Tuesday the bullion had gained a promising Rs.60, only to slump to lower prices.
Sovereign gold however retained its position at Rs. 25,000 per 8 grams without moving much. Silver coins also remained unchanged at Rs. 74,000 when buying and Rs 75,000 when selling per 100 pieces.
This is seen by many market leaders as rather inexplicable because several external factors looked on favorably to gold. From the US Federal Reserve’s impending decision to increase interest for a weakened dollar to the one rupee gold market phenomenon, it seems that gold has lost favor with the domestic Indian market.
The Indian Rupee rose in value against the US dollar. The value of gold prices could have fallen to a larger extent had it not been for the higher global prices of gold, which served as a hedge against the fall of gold’s value in the domestic Indian market. In the global market, the value of gold rose to a record five month high while spot gold hit the $1251.35 mark, its highest since July 11.
Many market experts believe that the Federal Reserve will raise interest rates today but may hold off its stance on monetary tightening due to fears of slowing global growth.
The director at Kedia Commodities, Ajay Kedia told in an interview to media outlets that if gold breaches $1,258, it would push higher to $1,270 if the Federal Reserve follows through with the widely speculated plans.
The Indian Rupee has gained and moved to Rs. 69.85 against the dollar. Yesterday saw the Indian Rupee registering its biggest one day gain yet, rising by a record 112 paisa against the dollar. A higher value of rupee is good for gold industries in the US because it brings down the value of import costs of gold in India.
This may support the domestic gold market in the future, although it may take a few months before such positive changes are observed. The Indian government’s crackdown on the ‘black markets’ which use gold to launder their money, has eased, with reports suggesting that the general sales tax and import duty may reduced to help the local market.
The dollar index was also seen to have slumped down by a small 0.3 percent today.