Traders said sentiment was dampened following a weak trend overseas where gold dropped for the seventh straight day, heading for the longest run of decline since May after Federal Reserve chief Janet Yellen hinted at a U.S. interest rate hike by the end of the year, strengthening the dollar and eroding demand for the precious metal as a safe haven.
Globally, gold lost 0.4 per cent to $1,316.09 an ounce, the lowest since July 27 in Singapore. Besides, sluggish demand from jewellers and retailers at the domestic spot market weighed, they said.
In the national capital, gold of 99.9 per cent and 99.5 per cent purity declined Rs. 50 each to Rs. 31,200 and Rs. 31,050 per 10 grams, respectively. The precious metal had gained Rs. 100 in Saturday’s trade. Sovereign, however, remained unchanged at Rs 24,300 per piece of eight grams in limited deals.
Friday’s trading action was notable, because at first markets (including the US stock market) interpreted comments by Fed Chair Janet Yellen as “dovish”—i.e. low interest rates will continue. This means rising money supply, and everyone “knows” that that means rising prices. Especially of assets such as stocks,gold and silver.
But then Fed Vice Chair Stanley Fischer reiterated that the Fed may hike rates in September. This means a shrinking money supply, or at least a slow in the rate of growth. Therefore… sell. And the markets dutifully did.
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