Gold Price Declines-VRK100-05Oct2011

Gold Price Declines

Due to concerns about paper currencies across the world, investors are flocking to assets, like, gold, silver and other commodities. The US dollar’s weakness has helped the commodities’ prices to rise faster. However, in the last few months, the US dollar is gaining strength against other major currencies, like, euro, pound sterling and others.

With dollar strengthening, global investors have started moving money to dollar assets and started selling other currencies, gold other commodities. After touching a peak of $ 1,930 per ounce, the world gold price has come down by 15 per cent to the current $ 1,640 per ounce. Accordingly, gold prices in India too should have come down from a peak of Rs 28,000 to Rs 24,000 per 10 gm. But the rupee value against dollar has weakened by 10 per cent in the past two months limiting the gold price decline to around Rs 26,000 per 10 gm in India.

Gold price in India is driven mainly by two factors – one is international gold price expressed in US dollars and the dollar-rupee exchange rate.

Gold price had gone up very fast in the last one year. As such, some investors may be booking profits on their investments by selling gold.