In the national capital, Delhi, gold prices fell for the second day in a row on Wednesday. Gold prices fell by Rs 700 to Rs 1.48 lakh per 10 grams due to lack of domestic demand and weak trend in the global market. According to local traders, gold of 99.9 per cent purity is priced at Rs. 700 reduced to Rs. 1,48,900 per 10 grams (including all taxes), which on Tuesday was Rs. 1,49,600 was closed. On September 29, its price was Rs 1,48,600 per 10 grams. If we look at the data, there has been a drop of 900 rupees in the price of gold in two consecutive days.

Why did gold become cheap?

Saumil Gandhi, Senior Analyst, Commodities, HDFC Securities, said that gold prices in the domestic market fell on Wednesday due to weak global market cues and lack of retail demand. He said gold prices also fell due to a rise in crude oil prices amid fresh concerns about supply disruptions due to tensions in West Asia. However, analysts say the fall in the rupee has limited the rise in gold prices. On Wednesday, the rupee fell by 43 paise to close at 96.78 (provisional). At the same time, traders said silver prices remained steady at Rs 2.27 lakh per kg for the third consecutive day.

Big drop in foreign markets

International gold fell $47.42, or 1.14 percent, to $4,116.55 an ounce, while silver fell 2.26 percent to a three-month low of $59.97 an ounce. Silver was last around this level on July 9, when it was priced at $59.96 an ounce. Akshat Siddhant, lead quant analyst at investment platform Mudrex, said gold is under pressure in global trade and hovers around $4,120 an ounce, while silver is around $60. Investors are awaiting the minutes of the US Federal Reserve meeting. These minutes can provide an indication of the Fed’s interest rate outlook. He said a strengthening dollar (which is near an 18-month high) is also limiting gold’s gains. There is a 70 percent chance of interest rate hike in December.

RBI has hiked interest rates

Amid the interest rate environment, the Reserve Bank of India has hiked its benchmark interest rate by 25 basis points (bps) to 5.50 percent. This is the first increase in nearly four years. The bank has indicated that further hikes are likely as rising inflation and a weak currency necessitate a policy shift. According to Radhika Piplani, chief economist at Motilal Oswal Financial Services Ltd, the RBI has changed its policy stance from ‘neutral’ to ‘calibrated tightening’. This reflects the intention to tighten both liquidity in the banking system and policy rates to control inflation. He said he expects a further tightening of 75 bps this cycle, taking the repo rate to 6.25 percent. This includes a hike of 25 bps in December, which has been largely accepted by market participants, Piplani said.