Gold prices fall sharply in India

NEW DELHI, Sept 13 (The Economic Times): Gold prices fell sharply in India on Friday tracking a decline in global markets.

On MCX, gold futures fell 1.0 per cent or about 500 to 51,280 per 10 gram. Silver futures slumped 1,056 to 67,926 to per kg. Both gold and silver have fallen sharply after hitting record highs of 56,200 and about 80,000 last month. On a week-on-week basis, gold prices are however up about 700 per gram.

Analysts say that covid vaccine developments and improving economic data present near-term headwinds to gold but low and negative interest rates, weaker US dollar and expectations of further stimulus will keep gold supported.

In global markets, gold futures on Friday dropped about 0.7 per cent to $1,950.20 an ounce.

Gold prices dipped on Friday after the European Central Bank stopped short of offering any concrete signals on further stimulus. Also, the US Senate blocked a Republican bill that would have provided around $300 billion in new coronavirus aid. Gold is perceived as a hedge against inflation and currency debasement. "Gold prices consolidated and remained at steady levels even when Nasdaq plummeted," says Nirali Shah, Senior Research Analyst, Samco Securities, referring to the sellloff in US tech stocks.

In India, gold ETFs saw an inflow of 908 crore in August, the fifth month of inflow in a row. This takes the net inflow in gold exchange traded fund or ETF category to 5,356 crore in January-August period of 2020.

Latest data show that the Reserve Bank of India's gold reserves rose by $321 million in week ended September 4 to $37.521 billion.

Despite a sharp price fall from last month's highs, physical gold dealers in India continued to offer discounts for a fourth straight week amid weak demand.

Dealer offered discounts of $30 an ounce over official domestic prices, Reuters reported, as compared to last week's $40. Gold prices in India, the second-biggest buyer after China, include 12.5 per cent import duty and 3.0 per cent GST.