The US dollar’s upward trend in the currency markets had its echo in the bullion market with precious metals, gold and silver, dropping sharply on Thursday.Heavy selling by market players saw gold and silver hit their six-month and four-month lows respectively. The two metals, however, recovered modestly late in the evening as the market in New York opened for the day. In Mumbai, gold fell by Rs 170 per 10 gm and closed at a six-month low of Rs 5660 per 10 gm. Silver dropped steeply by Rs 785 per kg to end the day at Rs 9,030 per kg, hitting a 4-month low.Standard gold (99.5) opened for the day at Rs 5,690 per 10 gm against the previous day’s close of Rs 5,830 and closed for the day at Rs 5,660, representing a fall of 170 per 10 gm. Pure gold (99.9) started at Rs 5,740 against previous close of Rs 5,880 and closed at Rs 5,710.Gold and silver were falling ever since US Fed started giving signals of a pick up in interest rate one week ago.Attributing the fall in gold and silver to perceptions about an increase in US interest rates, a banker said, “Fund managers who were buying gold are now offloading. During the last one year fund money was moving into commodities“US Fed Reserve Chairman Alan Greenspan is conveying a rise in interest rates in the medium term. Thus, a lot of investment flows will move into the dollar. That will again put commodities under pressure. Overall, the dollar will appreciate against all currencies.”A strong us dollar against leading currencies makes dollar-priced precious metals costlier when bought outside the us and discourages buying.
