Heavy selling by market players saw gold and silver hit their six-month and four-month lows respectively. The two metals, however, recovered modestly late in the evening, as the market in New York opened for the day.
In Mumbai, gold fell by Rs 170 per 10 gm and closed at a six-month low of Rs 5,660 per 10 gm. Silver dropped by Rs 785 per kg to end the day at Rs 9,030 per kg, hitting a 4-month low.
Standard gold (99.5) opened for the day at Rs 5,690 per 10 gm against the previous days close of Rs 5,830 and closed for the day at Rs 5,660, representing a fall of 170 per 10 gm. Pure gold (99.9) started at Rs 5,740 against previous close of Rs 5,880 and closed at Rs 5,710.
Attributing the fall in gold and silver to perceptions about an increase in US interest rates, IndusInd Bank executive vice-president Moses Harding told FE, Fund managers who were buying gold are now offloading. During the last one year, fund money was moving into commodities.
US Fed Reserve chairman Alan Greenspan is signalling a rise in interest rates in the medium term. Thus, a lot of investment flows will move into dollar. That will again put commodities under pressure. Overall, dollar will appreciate against all currencies.
Mr Harding said when golds support level at $395 per ounce gave away, a lot of stop-loss selling took place. He predicted that gold will move to $350 levels.