"Gold prices have witnessed a steep fall in line with the global markets and are likely drop further and may touch the Rs 10,400 to Rs 10,600 per 10 grams-mark by September-end," Bombay Bullion Association (BBA) President, Suresh Hundia. told reporters here today.
Domestic gold prices in July saw an inverted U shaped trend, rising in the beginning of the month trading initially at Rs 12,900 per 10 grams and then rallying up to a peak of Rs 13,567 per 10 grams by mid month. Gold then began its downward journey and at the end of the month finished at Rs 12,557 per 10 grams, much below the level it had initially begun.
The gold price dropped from Rs 12,705 on July 26 to the present Rs 11,300 per 10 grams in the local bullion market.
In the international market, the yellow metal dipped below $ 800 an ounce for the first time since December 2007.
As US economists see improved prospects for its economy, the dollar becomes more attractive as an investment. And as the dollar becomes more attractive, particularly in times of crisis, gold has lost its lustre, as have other precious metals.
the domestic market, gold demand has already started picking up and people have advanced their purchases before the Diwali and wedding season, following a sharp decline in prices, bullion traders said.
Market participants expect the metal to test further lows in line with the steep fall in its prices.
"The metal is losing its social value and more dependent on the foreign exchange," All India Sarafa Bazar President, Sheel Chand Jain, said, adding, every rise in dollar would reduce the appeal of the metal.
He said easing crude oil prices have also eroded the demand for gold as a hedge against inflation.
Gold in overseas markets hit an intra-day low of $ 773.90 an ounce, its weakest since November 20 last year, down from $ 811.25 late in New York on Thursday as the dollar firmed up to a six-month high against the Euro. Crude oil prices fell to $ 111.34 a barrel on demand fears.
Bullion traders said prices would see more lows in the next few days following a fall in demand among stockists and jewellery fabricators.
Overall, there has been a shortfall in demand for physical gold in India, which usually demands about 800 MT of the yellow metal annually.
According to the BBA, Indias gold imports have fallen by almost 50 per cent in the first quarter. BBA statistics say that gold imports in the first quarter of this year is 101 MT as against 193 MT during the same period last