n Diamond manufactures & exporters also feel the heat

Shares of gold loan companies and jewellery entities sharply declined on Monday after the yellow metal tanked to its lowest level in two years as fears of gold sale by Central Bank of Cyprus and other central banks in the euro region resulted in panic selling across the globe.

Muthoot Finance declined over 13%, while Manappuram Finance lost almost 10%, amid heavy volumes.

Jewellery stocks like PC Jeweller and Shree Ganesh Jewellery House ended down over 5.5% each as gold prices plunged more than 10% since Thursday.

Gold futures for June delivery on Multi Commodity Exchange (MCX) hit a lower circuit of 6% to touch its lowest level of R26,250 per 10 gram since September 2011. At 7 pm, gold futures for June delivery were trading at 26,400 on MCX.

Moreover, diamond manufactures and exporters also felt the heat due to panic selling in gold. Shares of C Mahendra Exports declined 5%, while Shrenuj & Co and Goenka Diamond and Jewels ended down 4.21% and 2.61%, respectively.

Sugandha Sachdeva, head of research, metals and energy, Religare Commodities, said that gold prices have broken below the 200-week moving average (on Comex at $1,535 an ounce), which is definitely an alarming sign for the long-term bull run that we have seen in the yellow metal for the 12 years. ?Going forward, $1,380-1,350 an ounce is the next support. On MCX, R24,500-24,000 per 10 gram is the short-to-medium target, where demand may emerge,? said Sachdeva.

Institutions across the world unwinded long positions and liquidated exchange-traded funds (ETFs). Investors were caught in a frenzy following reports that Merrill Lynch sold a colossal 400 tonne gold in futures markets on CME Group’s Comex.

Analysts said that comments by Mario Draghi has spurred a very disorderly sell-off in the market. Draghi?s message, indicating ?sell your gold or you are not going to get the money?, was fairly clear for the market, which was spooked by fears that other countries might be forced to sell gold to meet EU bailout requirements, they said.

The European Central Bank chief, at a press conference on Friday, said that while Cyprus doesn?t have to sell its gold, any money that is raised from the sale must go towards covering the losses from the emergency loans to country?s banks.According to World Gold Council (WGC) estimates, Cyprus has 13.9 tonne of gold as reserves. However, the amount held by other potential European bailout candidates is considerably more than Cyprus. France has 2,435 tonne of gold as reserves, Italy 2,452 tonne, Portugal 383 tonne, Spain 282 tonne and Greece 112 tonne. However, central banks are currently restricted to selling no more than 400 tonne per annum of gold in a calendar year.

Last week, US financial services major Goldman Sachs issued a bearish note and lowered its average-gold price forecast to $1,545 (from $1,610) an ounce for 2013 and $1,350 (from $1,490) an ounce for 2014. ?We recommend closing the long COMEX gold position that we first initiated on October 11, 2010,? stated Goldman Sachs. Citigroup followed suit by lowering its price estimate to $1,340 an ounce for 2015 and recommended an underweight rating on all miners across the gold and silver sectors.