In the spot market, gold rates in Mumbai were almost 2 per cent lower at Rs 27,694, while in Chennai the precious metal for 22 karats was quoting at Rs 27,965.
The reason for the drop in domestic spot prices of gold were two fold. Spot gold in the international markets was down 2.20 per cent at $1269 an ounce. The reason for the drop was hopes of a US Debt deal being struck ahead of the Oct 17 deadline.
The US Republicans and Democrats in the Congress have failed to agree on raising the US debt limit. In the event of the same not happening, the US could default on its obligations. It's increasingly looking like a debt deal would be signed which has pushed gold prices lower. The precious metal tends to rally during uncertain times and loses ground when normalcy is restored.
On the MCX gold for December delivery was down 1.7 per cent at Rs 28,365, while silver was down almost 3 per cent at Rs 26,891.
Gold is expected to continue to trend lower as the US debt default is thwarted and investors shift their focus back to equities.