Gold prices dropped to Rs12,155 by Rs370/10 grams on Wednesday. International prices too fell to $726/ounce. However, silver remained unaffected by the tumble in the yellow metal. Bullion stocks in the world's major gold-backed exchange-traded fund, SPDR Gold Trust, fell to 755.64 tonnes, as per the fund data of 21 October, down from a record of 770.64 tonnes on 13 October.
"On Thursday the physical gold demand in India is expected to increase as Diwali celebrations will start in another three days. Demand for physical silver should top by next weekend (after bhaiya dooj) and fall thereafter. However, if physical silver prices fall after Diwali, demand will remain robust," said Chintan Karnani of Insignia Consultants.
Giving a technical view, Karnani said gold December contract on COMEX (New York Mercantile Exchange’s Commodity Exchange) will find key support at $690/ounce and a fall below that level will find sellers emerge. "On the higher side, a break of $735.60/ounce will result prices going up to $753/ounce and then $769/ounce."
"On Thursday, spot gold might fall to $660/ounce and silver to $8.20/ounce. I would advise traders to purchase gold when it reaches Rs11,200/10 grams," Ashok Mittal of Shri Balaji Commodities said.
Harish Galipelli of Karvy Comtrade said "Market sentiment is weak; yesterday market cleared the support of $735/ounce and is likely to extend the decline towards $700/ounce." He believed that silver might be pulled down to Rs16,000/kilogram in the domestic market.
"Silver needs to hold $9.00/ounce to be in the intra-day bullish zone. Sellers will emerge only on a consolidated fall below that level, and then prices could head towards $8.76/ounce and $8.40/ounce. On the higher side, $9.80/ounce and $10.33/ounce are the first and second resistances," Karnani said.