Gold prices fall to 20-year low

Gold has plunged from early May levels near $290.00, hit by news that Britain planned to sell 415 tonne from its gold reserves during the next couple of years, switching the revenue into dollars, euros and yen.

Increased physical demand, producer cutbacks and project suspensions at the lower prices have failed to lift sentiment in a market dominated by Britain’s reserve auctions and other sales planned by the International Monetary Fund and Switzerland.

Bullion dealers have speculated that last week’s tighter gold lease rates, and the rise of one-month rates above those for a year, were due to another central bank removing metal from the lending market in preparation for a sale.

Kamal Naqvi, metals analyst for Macquarie Equities, said in a weekend report that 10 countries had been listed among rumoured sellers but added that proof was hard to find. "Ultimately the lease rate movements do bear the hallmarks of central bank selling but there is no evidence yet and any central bank announcing such a sale given the current political nature of the gold market would be extremely brave," he said.

Thousands of South African gold miners marched on British and Swiss diplomatic missions over the weekend to demand a halt to bullion sales they say threaten the livelihoods of hundreds of thousands of miners and their dependents.

In the bullion market, dealers said European summer holidays were gradually draining liquidity from precious metals spot markets, leaving prices prone to sharp moves. Spot metal was last at $253.10/$253.60, 40 cents below Friday’s US close. Silver was down three cents at $5.04/$5.06.

Local prices also dip

MUMBAI: The precious metals gold and silver turned weak on the bullion market today due to fresh fall in global prices. The fresh fall in gold prices at the international market generated good inflow of raw silver into the domestic market and prices remained depressed.

Standad gold declined sharply by Rs 20 to end at Rs 4000 from the last close of Rs 4020. 22-carat gold was nominally quoted weak at Rs 3700 as against the last level of Rs 3720. Ten-tola gold bar (.999 purity) fell by Rs 100 to Rs 47,000 from the previous close of Rs 47,100. Ready silver (.999 fineness) eased to Rs 7890 from Rs 7895. Raw silver (.916 fineness) declined by Rs 35 to Rs 7735 from Rs 7770. Tenderable silver dropped moderately by Rs 5 and closed at Rs 7895 from the previous close of Rs 7900.