GOLD DIPS BELOW 30000

Gold prices today fell below the Rs 30,000-level for the first time in seven months here due to hectic selling by stockists triggered by a global meltdown. The precious metal tumbled by Rs 480 to Rs 29,720 per 10 grams, a level last seen on July 21, 2012. Gold had lost Rs 215 in last two days. Silver followed suit and dropped by Rs 1,250 to Rs 54,550 per kg, in continuation to a loss of Rs 1,050 in last two sessions, on poor offtake by industrial units and coin makers. Bullion merchants said selling pressure gathered momentum as gold slumping to the lowest level since July in overseas markets, after minutes from a Federal Reserve meeting showed a debate over the risks and benefits of more stimulus. In Singapore, gold fell by 0.6 per cent to USD 1,555.55 an ounce, the lowest since July 12 and silver by 0.3 per cent to USD 28.47 an ounce in Singapore. In addition, sluggish domestic demand on ending of marriage season and investors selling to pay losses in equity markets, further dampened the sentiment, they said. A weak signals from futures markets on speculators reducing their exposure to bullion on falling commodities and lower Indian rupee also influenced the trading sentiment. On the domestic front, gold of 99.9 and 99.5 per cent purity tumbled by Rs 480 each to Rs 29,720 and Rs 29,520 per 10 grams, respectively. Sovereigns fell by Rs 150 to Rs 25,150 per piece of eight grams. Similarly, silver ready plunged by Rs 1,250 to Rs 54,550 per kg and weekly-based delivery by Rs 1,800 to Rs 53,300 per kg. Silver coins also dropped by Rs 1,000 to Rs 78,000 for buying and Rs 79,000 for selling of 100 pieces. WHY IT IS TUMBLING? The yellow metal, which has dropped to an seven-month low in the overseas market, fell another 1 per cent in futures market in India on Thursday, though a weak rupee limited the downside. The most active gold contract for April delivery on the Multi Commodity Exchange was trading 0.92 per cent lower at Rs 29,307 per 10 grams, after falling to Rs 29,305 earlier, the lowest level since July 23, 2012. The yellow metal dropped to an seven-month low, its third straight session of weakness, as signs that some Federal Reserve officials were reconsidering the scale and duration of the US monetary stimulus programme spooked investors. The fall in the commodity prices globally was on account of unwinding of large positions by a large commodity hedge fund. According to a WGC report, global demand for gold fell last year in its first tumble since 2009 as demand in leading market India slid, narrowing the gap with second-biggest buyer China. The report also added that India's gold demand dipped by 12 per cent in 2012 to 864.2 tonne, mainly on account of higher import duties, jewellers strike over proposed measures to curb imports and a sharp rise in the domestic price. The precious metal has gained 5.6 per cent in 2012 whereas it has declined by more than 5 per cent since the beginning of 2013. The end of quantative easing (QE) will make all the asset class to tumble badly, erasing all its earlier gains. The FOMC minutes were a major event which added pressure on the commodities. The Fed officials are concerned about the "efficacy, costs and risks of asset purchases." "An ongoing evaluation of these factors could lead the committee to control its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred," India Forex said in a note. "This means that Fed officials could end quantitative easing way before they reach their 6.5 per cent unemployment target. We are not surprised that Fed officials talked about phasing out asset purchases again," said the note. India Forex Advisors is of the view that gold is in a triangular consolidation phase with resistance at $1669 and crucial support at $1600. If the support is breached on a closing basis, then further downside up to $1550-1450 is expected. According to the report, gold prices have been rallying since November 2008 till September 2011, supported by the Euro zone sovereign debt crisis and especially due to the challenges faced by countries like Greece, Portugal and Spain. "Going ahead, the levels of $1600 and $1700 will be closely watched for further direction. A break of $1600 on a closing basis will be very bearish for gold. If it breaks this level on the downside, then we might see further downside towards $1500-$1450," it added. Fiscal Deficit Concerns: In the month of January 2013, the government hiked the import duty on the precious metal by 50 per cent to 6 per cent in an effort to reduce demand and help stem the country's ballooning current account deficit. India is the world's top gold consumer and gold purchases account for one of the biggest contributors to India's current account deficit. The government wants people to cut down their gold purchases, but this will be difficult as India is the world's largest gold importer. For the upcoming Budget, a further hike in gold import duty is unlikely, but if implemented will be negative for Titan Industries.