Gold Prices Set To Drop Again On Monday, Rs 500 Fall Likely

Gold rates on Monday at the local jewellers could fall once again, after taking a drop of nearly Rs 800 to Rs 1,000 over the weekend for 22 karats gold for 10 grams.

Fall in international prices in Asian trade on Monday morning could lead to a further fall in the Indian cities. Gold in Asia was down 1.3%. In India, gold prices follow the international prices, and a similar amount of drop of 1.3% could mean that we could see gold drop by around Rs 500 to Rs 600.

Gold prices drop on the MCX

Gold rates on the MCX opened lower, dropping by 1.3% or Rs 550 over Friday's close. Gold ETFs too fell sharply in trade. Remember Gold ETFs did not react on Friday, like the MCs, which trades until 11 pm. So, since they closed Friady trade at 3.30 pm, gold ETFs opned lower by a solid 2.5%. HDFC Gold ETF was down 2.5% at Rs 41.30, while ICICI Bank Gold ETF was down 2.44% at Rs 41.32.

Having said that we also need to remember that the fall could also be impacted if the rupee gains against the dollar. If the rupee falls against the dollar, the drop could be restricted. At the moment 22 karats gold in the city of Chennai was trading at Rs 45,700 per 10 grams, Bangalore it was Rs 43,750 per 10 grams, in Hyderabad gold was at Rs 43,850 and Kerala 22 karats gold was also trading at Rs 43,850 per 10 grams.

International prices of gold fall

Gold in the global markets were down to $1738.20 an ounce in Asian trade on Monday morning, after closing at $1763 an ounce over the weekend.

In fact, Gold Oct dropped to a low of $1,677 before recovering to trade at $1738.20 an ounce. Silver October futures lost 3.1% to $23.78. Platinum was also off, losing 1.24% to $960 for October futures.

The fall in the prices of gold begun late last week after the US jobs data revealed that unemployment fell sharply and wages rose. This means there are worries that the US Fed could announce the withdrawal of its taper programme, much earlier than anticipated.
All eyes would be on the Jackson Hole meeting, later this month, where it is expected US Far Chair person, Jerome Powell would be speaking.

If any hints of withdrawal of US Tapering is suggested, we could see gold prices fall even further, given that liquidity from the system is withdrawn. Many investors are betting on the fact that gold prices could fall even further. Indian markets would watch what happens to gold on the MCX, when the markets open at 9 am today. A drop of around Rs 400 to Rs 600 per 10 grams looks almost certain and gold futures on the MCX are expected to have another fall.

Should you buy gold now

Investors looking to buy should be cautious as there is a possibility of a further downside in gold. If you are looking to invest, the ideal way would be to wait for declines before jumping in.

In a survey published late last week by a leading gold portal, there was not one bullish vote among Wall Street analysts. This means there is a possibility of bearish trend in gold continuing at least in the short term. The global economy too is recovering and with vaccination happening across the globe, gold outlook is unlikely to improve. At the moment there is no incentive or triggers for gold. Physical demand too over the last few quarters have been declining.