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Gold, silver prices take a beating

Syed Firdaus Ashraf in Bombay

The bullion market in Bombay went through a depression today with prices of both gold and silver falling drastically after the United Kingdom treasury decided to sell its gold reserves.

The price of standard gold dropped by Rs 70 to Rs 4,070 (Rs 4,140 yesterday). Gold 22 carat was quoted Rs 65 lower than yesterday's 3,830 at Rs 3,765.

Silver ready (.999 fineness) declined by Rs 60 to Rs 7,945. Raw silver (.916 fineness) dropped by Rs 150 from Rs 7,960 to Rs 7,810

Since morning, sentiment on the bullion market was depressed. The trading in gold opened at Rs 4,075, but the price fell right through the day following reports that British banks had begun offloading their gold.

M G Damani, president of the Bombay Bullion Association, told rediff.com, "The selling of gold from their reserves automatically affects gold prices in India. We import gold and any effect on international markets affects us."

Damani said gold prices would fall further if the banks in England continued to convert their gold assets into dollars.

He felt the banks are selling their gold because of the fall of the euro against the dollar. "Every country realises that the dollar is going to play a dominant role in international trade. And considering that the euro is losing its value against the dollar, banks in England are positioning themselves stronger by acquiring dollars," he explained.

Two years ago, the Swiss government too had decided to sell its gold reserves, leading to a drastic fall in prices.

India is one of the largest importers of gold. Gold accounts for the biggest chunk of Indian imports after petroleum and its products.

But Nirmal Jhaveri, director, Tribhovandas Bhimji Zaveri, a leading jewellery store in Bombay, said, "This is a temporary phenomenon and a good time to invest. I don't think prices will fall further because we have to consider the mining cost of gold before we decide to pass judgement on how much the prices will fall. I think the price has already reached its bottom line."

Ketan Shah, the secretary of the Bullion Association, was more guarded: "At the moment we cannot predict what lies in the future as prices are falling continuously. We will have to wait and watch for another two days."

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