Gold prices are in a free-fall and have dipped by 4 per cent in the last 10 days as international benchmark gold prices plunged below the psychological level of $1,200 an ounce on expectations of a sooner-than-expected US Federal Reserve interest-rate hike.
Spot gold prices in Mumbai dropped by ₹1,010 per 10 grams on Friday to ₹28,610, against ₹29,610 recorded on March 1.
Besides global developments, gold prices in India fell amidst weak sentiment and government measures to curb gold import, besides bullish equity markets attracting investor attention.
On the MCX, gold for April delivery was down by ₹1,062 to ₹28,366 per 10 grams against ₹29,428 logged on March 1, reflecting further weakness in gold prices in the coming days.
The dip in prices pulled down gold turnover in the most liquid near-month contract to ₹2,677 crore from ₹2,922 crore.
Spot gold on the LBMA was down by 0.4 per cent at $1,196 per ounce on Friday, its weakest since January 31, on the back of a stronger dollar ahead of closely-watched US non-farm payrolls reports.
Prathamesh Mallya, Chief Analyst, Angel Broking, said the probability of a US Fed rate hike at the next FOMC meeting scheduled for March 14 stands at over 80 per cent.
Downward pressure likely
This apart, he added that the recent comment of US Federal chief Janet Yellen about the possibility of a rate hike soon would exert downward pressure on gold prices.
Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions, said the market had earlier expected the US Fed to raise lending rates in June but given the positive surprises in the key economic data released, the rate hike may happen at the next meeting. “The range for international gold prices would be $1,180 to $1,340 an ounce on the higher side, with support at $1,203 level. In the domestic market it would trade between ₹28,200 and ₹29,900 per 10 grams,” he said.
In February, gold imports increased 82 per cent to 50 tons, according to the consultancy firm GFMS, a division of Thomson Reuters. The rise in imports was largely due to the lower base effect as importers last year deferred shipments on expectations of a cut in import duty.
Gold imports more than halved to 54 tons in December and 53 tons in January from a high of 119 tons logged in November, when the government demonetized high-value currencies