Gold tumbles to 6-month low post demonetization

Gold extended its slump for the second day as it slipped below the Rs 29,000 mark by falling Rs 250 to an over six-month low of Rs 28,800 per 10 grams in the bullion market on Tuesday, tracking a subdued global trend.

Moreover, reduced offtake by jewellers owing to a considerable fall in demand at the domestic spot market in view of the prevailing cash crunch following demonetization of high-value notes hurt sentiment. Silver too declined by Rs 100 to Rs 41,100 per kg on reduced offtake by industrial units and coin makers.

Traders said sentiment was downbeat, largely in sync with a weak global trend, where gold closed at near 10-month lows as investors shrugged off the ongoing political turmoil in Italy that boosted appeal of equities and other riskier assets. Globally, gold price fell 0.60% to US $1,170 an ounce and silver by 0.06% to US $16.71 per ounce in New York on Monday.

The government on November 8 had scrapped 500 and Rs 1,000 rupee notes to flush out black money, leading to a cash crunch in the market.

In the national capital, gold of 99.9%  and 99.5% purity plunged Rs 250 each to Rs 28,800 and Rs 28,650 per 10 grams, respectively -- a level last seen on May 31 when it had closed at Rs 28,850. The precious metal had lost Rs 200 in Monday's trade.

Sovereign followed suit and traded lower by Rs 100 at Rs 24,300 per piece of eight grams. Following gold, silver ready declined by Rs 100 to Rs 41,100 per kg, but weekly-based one jumped by Rs 835 to Rs 41,200 on speculative activity.

On the other hand, silver coins remained steady at Rs 74,000 for buying and Rs 75,000 for selling of 100 pieces in scattered deals.