Gold price plunges `1,300 after selloff in US markets

Gold and silver witnessed one of the steepest falls in the recent history as a selloff triggered by margin calls in equity markets last week got extended on Monday despite the US Federal Reserve lowering interest rates.

In the Delhi spot market, gold lost `1,300 per 10 gm from the previous close of

`42,600 to `41,300 on Monday. Silver saw one of its steepest fall in a single day as it fell from `41,500 per kg to `37,000, losing

`4,500 per kg.

Silver futures on Multi Commodity Exchange crashed by 16 per cent to test the floor of `33,756 in one of the biggest singleday falls in the history of MCX.

In the international market, gold fell more than 80 dollars per ounce during the intraday session between a high of $1548 and a low of $1454. Silver fell from $14.75 to a low of $12.01 an ounce.

In the morning, gold in the Asian markets had opened higher on the back of US Federal Reserve’s rate cut. However, the metal underwent significant correction as the session progressed.

“The fall in gold and silver started in the second half of last week when investors rushed to pay their margin calls triggered by the drop in global stock markets amid constant concerns over the coronavirus spread,” said Ajay Kedia, MD, Kedia Commodities.

The market is in fact surprised by Monday’s fall as the lowering of interest rate by US Federal Reserve is generally positive for gold.

“Investors are surprised with today’s fall in bullion as generally it has been observed that whenever there is a rate cut by Federal Reserve in the US, gold jumps, but today the Federal Reserve held its second emergency meeting this month, voting to cut overnight rates to zero per cent, similar to the levels of the global financial crisis. Despite this bullion crashed,” said Kedia.

According to Himanshu Gupta, vice president and head of commodities and currencies research, Globe Capital, investors are a bit more cautious about asset classes at this moment.