Thursday, 17 December 2015

Reason for gold price drop chennai



Here are 7 reasons why gold prices are falling across the world:

1. Curb on gold import

Tough measures taken by both the government and the RBI to curb gold import amid slowing investment demand against the backdrop of a strong rally in equities, which is emerging as a preferred investment asset class, are taking some sheen out of the yellow metal.

2. Higher domestic gold inventories

India was the top consumer of the metal in 2014 and the second biggest after China in the first quarter of this year.
Higher domestic gold inventories is also having an impact on price movements of the yellow metal, a bullion trader said.

3. Concerns over monsoon

Demand for gold in India is also sluggish as concerns over a weak monsoon still remain.

Farmers are key to the country's bullion demand.

Nearly two-thirds of India's gold demand comes from rural areas where jewellery is a traditional store of wealth for millions who have no access to the formal banking system.

4. Massive selling in China

China on Monday dumped a huge amount of gold on the market, causing the price of the precious metal to fall drastically.

Reports that China gold reserves were half the expected level added additional selling pressure on gold.

According to reports, some 33 tonnes were sold in the Shanghai spot market on Monday as investors sought to shift focus to other avenues. 

5. Stronger US dollar

A stronger greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to dent demand and, in turn, pull prices lower.

In wider markets, the dollar hit a three-month high against a basket of currencies, making dollar-priced gold more expensive for holders of other currencies.

"The current downswing in Indian gold prices is directly related to the strengthening of the US dollar in recent times. We are hoping that the present trend may be arrested soon and the prices could stabilize within a month or so," said Mumbai Jewellers' Federation president Rakesh Shetty.

6. Worry over US Fed rate hikes

Gold has breached key support levels as the dollar gained after Federal Reserve Chair Janet Yellen told Congress last week that the Fed is on course to raise interest rates if the US economy expands as expected.

A rise in US interest rates will attract investors to the dollar for higher returns, driving up its value.