Gold's investment appeal got a drubbing on Monday as prices fell by a sharp Rs 380 per 10 gram with investors flocking to alternative options -- stocks and rupee, both zoomed by record levels.
Marketmen said the precious metal may now witness a downslide from its current high levels. "The ongoing changing scenario on the financial front will put more pressure on the gold prices in coming sessions as money is seen diverting to the attractive stock markets," said Sheel Chand Jain, president of the All India Sarafa (Bullion) Bazar Association.
While the gold prices dropped by a whopping Rs 400, or 2.55 per cent, to Rs 14,630 per 10 gram in the national capital, it lost Rs 385 at Rs 14,440 at the Mumbai bullion market.
In the futures market also gold traded lower. At the Multi Commodity Exchange of India, it traded lower by 3.34 per cent for the June delivery at Rs 14,254 per ten gm.
A steep fall in prices in the overseas markets was another dampening factor. The metal fell 8.60 dollar to 922.10 dollar an ounce in New York. Gold moves in tandem with global rates, marketmen noted.
After crossing the high level of Rs 15,000 just four days ago on May 14 in Delhi, the precious metal fell today as stocks and rupee seemed regaining their favour with investors.
With stocks tumbling from their 20,000 levels and the rupee weakening to all-time low sub 52-levels in the wake of global financial meltdown hitting the Indian shores, gold had emerged as the darling of investors. The precious metal even went to set an all-time record of Rs 15,800 per 10 gram just a couple of months ago in February.
Gold, widely seen as a hedge against rising inflation, held on to its high levels even after the rate of price rise nosedived to almost zero.
Meanwhile, boosted by the mandate to the UPA for a new term in office, stocks and foreign exchange markets saw an unprecedented rally today, fuelled by frenzied buying on hopes that the government would bring in stability and push the economy forward.
The rush to buy stocks tripped the market, where trading was limited to less than a minute after the benchmark indices rose by more than 20 per cent. The benchmark Sensex rose more than 2,000 points in less than a minute's trade.
Foreign exchange markets also saluted the mandate to the UPA, with the dollar becoming cheaper by 152 paise, the highest in over two decades, signalling a robust inflow of foreign funds.
The rupee gained 3.02 per cent to a five-month high of 47.88/89 against the dollar, which analysts say is the largest single-day appreciation of the Indian currency since 1986.
