Gold price dips by Rs 1,200 in a single day

Gold today witnessed the second largest drop in prices within a month in a single trading day, as the price of the precious yellow metal retreated by Rs 1,200 a tola (11.664 grams).

The price of gold is fixed today at Rs 50,000 a tola, which stood at Rs 51,200 yesterday. In the international bullion market, gold fell to $1,400 per troy ounce following the low US inflation data.

Investors chose to liquidate gold as the US wholesale prices fell by 0.7 per cent in April. The higher rate of price slump removed the need of holding gold that is considered a hedge against inflation.

Back in April 16, gold price had dropped by Rs 3,300 to Rs 49,500 per tola in the domestic market following panic selling by gold hoarders in the international bullion market.

The possible sell-off of gold by Cyprus and further monetisation of gold reserves across Europe, Goldman Sachs taking short position on gold, and the possibility of the US Federal Reserve ending Quantitative Easing sooner, had impelled investors to sell gold back then that pulled down the price.

Likewise, fourth quarter recovery in the jewellery sector continued into the first quarter of 2013, according to the World Gold Council's Gold Demand Trends that has claimed that investment demand has however, declined. The report attributed decline in investment demand — relative to first quarter of 2012 — to the net outflows from ETFs, which obscured the strong rise in investment for gold bars and coins at the retail level. "Likewise, central banks have added 109.2 tonnes of gold to their reserves in the first quarter of 2013, the ninth consecutive quarter of net purchases," it said, adding that global gold supply has also witnessed a little change in the first quarter of 2013 compared to the first quarter of 2012, and stood at 1,051.6 tonnes.

However, global first quarter gold demand of stood at 963 tonnes was valued at $50.5 billion. India and China accounted for 62 per cent of first quarter global jewellery demand, generating year-on-year growth of 15 per cent and 19 per cent, respectively. Likewise, global jewellery demand of 551 tonne was worth a record $28.9 billion, surpassing the previous quarter's record.

Chinese demand in gold bars and coins grew to 109.5 tonnes, and more than double the five-year quarterly average of 43.8 tonnes, it added.

Similarly, central banks also added 109.2 tonne of gold to their reserves in the first quarter of 2013, the ninth consecutive quarter of net purchases. The sector accounted for 11 per cent of demand in the first quarter, worth a value of $5.7 billion. “At 1,051.6 tonne, total gold supply was little changed in the first quarter,” it said, adding that mine production in first quarter of 2013 generated 688 tonne of supply, four per cent more than first quarter of 2012.