Gold declines ~1,000 on global cues, but consumers stay away

The price of gold corrected by 0.5 per cent in intra-day trade on Tuesday, following global cues, as investors booked profit amid fears of large selloffs in equity having knock-on effects on the bullion.

In early trade, the price dropped by ~1,200 to ~42,371 per 10 gm in futures trade on the Multi Commodity Exchange (MCX) for its delivery in April.

In the benchmark physical markets at Zaveri Bazaar, it declined by ~1,000 to trade at ~42,406 per 10 gm.

However, gold closed ~778, or 1.8 per cent lower, at ~42,637. Silver closed at ~980, or 2 per cent lower, at ~48,055 per kg.

The decline in the gold price was followed by the bullion’s move in the international markets.

In London spot trade, gold opened at $1,659.38 an ounce, or oz (one ounce is about 31 gm) and jumped to $16,64.04 an oz in early trade.

But, profit booking pulled down the bullion to the day’s low of $1,633.13 an oz before recovering to trade at $1,652.80 an oz in early afternoon trade in London.

“Jewellery demand was very thin on Tuesday. But with the gold price falling a little from yesterday’s (Monday’s) high, we do expect higher walk-ins and footfalls in the evening hours today (Tuesday),” T S Kalyanaraman, chairman and managing director, Kalyan Jewellers.

Kalyan Jewellers has seen stable sales over the last weekend. “With both the wedding season and Akshaya Tritiya coming up, we are getting more enquires for our rate protection and prebooking offers, a facility that customers avail of when prices are volatile,” Kalyanaraman said.

Gold prices have moved up strongly in the past eight months, with investors yielding returns of nearly 30 per cent on global economic uncertainties.

With countries like Japan and China having announced a monetary stimulus and more countries are planning such support worth billions of dollars to prevent their economies from recession, investors are moving towards safe-haven assets.

The worsening coronavirus spread in China and the rest of the world has strengthened gold’s appeal as the most preferred investment avenue.

“Gold is passing through its bullish cycle, which comes once in seven-eight years, in which the yellow metal appreciates 30 -40 per cent. The metal’s upward move got support from global economic uncertainties. Today’s correction is just temporary profit-booking by investors. This continues for a short period for a rebound in a couple of days,” said Vishal Wagh, head of research, Bonanza Portfolio.

Gold prices on Tuesday remained highly volatile. Gold for delivery in April opened at ~43,176 per 10 gm on Tuesday on the MCX, a sharp decline from its previous day ’s close of ~43,580 per 10 gm on profitbooking. The gold price for delivery i n April f urther declined to trade at ~42,371 per 10 gm before recovering to ~42,876 in late afternoon. Overall, the April gold contract price recorded a decline of 1.6 per cent from its previous day’s close.

“The current gold-silver ratio stands at around 90, which indicates that silver prices have more room for appreciation than gold, which would depend upon demand in i ndustrial commodities including base metals,” said Gnanasekar Thiagarajan, director, Commtrendz.

Gold’s safe-haven appeal got support from an increasing number of coronavirus cases outside China.

Meanwhile, the impact of gold’s decline in London was slower in India due to rupee appreciation. The rupee appreciated by 0.2 per cent or 15 paise in the day before closing with a marginal appreciation of 4 paise to close at 71.88 against the greenback. Meanwhile, the sharp volatility in gold prices has lowered physical demand in jewellery stores.