Gold prices fall by Rs1,840 per 10 gm; biggest single-day drop

After climbing to the all-time high of Rs28,145 mark earlier this week, gold prices witnessed the biggest one-day drop of Rs1,840 in Mumbai on Thursday on frantic selling by investors, marring its image as hedge against volatility.

The steep fall followed trends in global market. In London, the precious metal fell by 3.1% to USD 1,704.25 an ounce amid strong US economic data and expectation of more Federal Reserve stimulus.

Gold came down even as equity markets continue to fall on sustained fund outflows. The BSE Sensex dropped 139 points to 16,146.33 on renewed fears of interest rate hike as food inflation neared double digit. Asian and European stocks however showed mixed trends.

Another investment option dollar also held steady against other major currencies in Asia even as investors are keenly awaiting speech by US Federal Reserve chief Ben Bernanke on Friday.

Standard gold (99.5 purity) nosedived by Rs1,840 per 10 grams to close at Rs25,670 per 10 grams at the bullion market here. Gold declined by almost 9 per cent from the record level of Rs28,145 per ten gram set on August 23.

In Delhi, the bullion market remained closed today as traders observed one-day bandh in support of Anna Hazare's fast against corruption. Rakesh Anand of RK Jewellers said retail customers missed the opportunity to buy gold as prices would have declined sharply by as much as Rs1,500 per 10 gram going by the global trend.

Going forward, experts said, gold prices would further decline as it is more vulnerable to global momentum, where it is undergoing drastic correction. In Europe, spot gold was down 2.2 per cent at USD 1,711.99 an ounce.