Gold price in India now stands at Rs.26500 per 10 grams. Silver crashed over 10% to settle below Rs.53000 per kg. Apparently, the fears of global recession have spooked the prices of white shining, industrial metal hard and out. But, even yellow metal looked weak ahead of a likely Greek default and cracks in the euro zone.
Contributing to the woes of these precious metals is unusual strength in the US dollar, putting downward pressure on gold and silver prices that usually works at inverse correlation with the world reserve currency.
Bullion market veterans are already lamenting this as dusk period for the gold bubble, which was nothing but fuelling its strength from the panic gripped global outlook.
Gold, which is usually perceived as safe-haven asset, should build on strength on any panic news such as financial crisis or sovereign defaults. However, despite acute euro zone crisis and Greece on the brink of a default, the precious yellow metal has pared gains – which indicates that gold prices are inflated at this juncture.
One can say that gold prices have appreciated too soon, too fast over the last 2 years; so much so that the gold fundamentals (demand-supply dynamics) have lagged behind by a great margin as compared to its meteoric price rise. At such times, it is but obvious that gold prices would become inelastic to the crisis situation prevailing around the globe.