Gold prices fell for the third straight session, declining Rs 900 to Rs 1.54 lakh per 10 grams in the national capital on Wednesday as a stronger US dollar and weak global trends weighed on investor sentiment.
The yellow metal of 99.9 per cent purity had closed at Rs 1,54,900 per 10 grams on Tuesday. Silver, however, remained unchanged for the second straight session at Rs 2.42 lakh per kilogram, inclusive of all taxes, according to local traders.
"Gold traded weak on Wednesday as traders booked profits at higher levels," said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.
The dollar index rose towards 100.85, adding further pressure on bullion, he added.
While gold prices have weakened in recent sessions, the precious metal remains significantly more expensive than a year ago, a change that is also altering the way domestic consumers buy it.
According to Akshat Garg, Head of Research & Product at Choice Wealth, the 15 per cent fall in Ganesh Chaturthi sales volumes does not mean Indians have lost their affinity for gold; rather, it shows a change in how they buy it.
“Domestic gold prices have gained around 60 per cent, from roughly Rs 98,000 to Rs 1.57 lakh per 10 grams in one year, driven by the global rally, a depreciating rupee and an increase in import duty from 6 to 15 per cent in April,” Garg said.
At these levels, a traditional heavy necklace no longer fits the family budget. So, buyers are choosing lighter jewellery, exchanging old pieces, and moving investment money into coins, digital gold and ETFs, he added.
"Consumers are now keeping jewellery and investment separate," Garg said, noting that jewellery is
purchased for specific purposes such as weddings, while investment in gold is increasingly held in financial forms that have no making charges, are easy to store and can be bought in small amounts.
In global markets, spot gold fell $41.49, or 1 per cent, to $4,317.09 per ounce, while silver dropped nearly 3 per cent to $65.17 per ounce.
"Spot gold slipped below $4,320 an ounce and silver edged lower toward $65 as the dollar strengthened to 100.86, its highest level since July, as hawkish commentary from Federal Reserve officials reinforced expectations of further monetary tightening," said Kaynat Chainwala, AVP Commodity Research, Kotak Securities.
Meanwhile, Richmond Fed President Tom Barkin added to the chorus of hawkish voices, indicating that rate increases and the credible threat of more could temper business inflation expectations and cool price pressures without necessarily slowing economic activity.
Such expectations of tighter monetary policy weighed on bullion, which tends to come under pressure when higher interest rates make precious metals, such as gold, less attractive for investors, Chainwala said.
