Gold plummets 3.1% in worst single-day fall since Nov 2015 on margin woes

Gold, which emerged as a safe haven in the last few months, plunged on Friday even as equities rebounded sharply after a steep fall. 

During this week, gold fell more than Rs 3,000 per 10 gram while silver shaved off over Rs 4,000 per kg. Investors encashed gold to pay for margin shortfalls or losses in other asset classes.

Traders, who made profit in the gold bull run this year, including international institutional investors, have booked profit either to have cash or forcibly sold it to meet margin shortfall or loss in other assets.

Gold price in Mumbai’s physical market on Friday fell 3.1 per cent or Rs 1,351 to close at Rs 41,848 per 10 gram. Friday’s fall in per cent terms is worst after November 2015 and, in absolute terms, the worst after August 2013. Silver prices fell Rs 2,255 to close 5 per cent lower at Rs 43,085 per kg on Friday.

Market experts said fall in precious metals continued even on Friday as there was no fresh buying because the yellow metal is still quite high, whereas retail demand is absent.

Shekhar Bhandari, president & business head for global transaction banking and precious metals, Kotak Mahindra Bank, said, “The COVID-19 pandemic and oil collapse have sent treasury yields to record lows, equity markets to bear phase and gold trade at a seven-year high. Gold demand is quite dull, which is in line with the fall in discretionary demand, across the country. High prices and volatility in prices of gold are keeping buyers away.”

He was, however, optimistic about the demand when markets settle down. He added that, “Demand may recover next month, if fears subside. Those waiting to buy gold may buy when prices stabilise or at lower levels.”

As of now, the fact that demand for gold was almost gone was reflected in the cost of import and market price. 

During Friday’s closing rate of Rs 41,849 per 10 gram, gold was still Rs 400 lower than the cost of import. During the day, discount quoted was around Rs 900 to Rs 1,000 per 10 gram.

Even imports have fallen significantly since the last few days because of volatile prices.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel