Gold price hits 4-month low, plunges by Rs 180 to Rs 29,400 per 10 grams

New Delhi: Extending its downtrend for the sixth straight day, gold on Tuesday plunged by Rs 180 to over 4-month low of Rs 29,400 per 10 grams on muted demand from local jewellers and retailers even as the metal showed some strength overseas.

At the Multi Commodity Exchange (MCX), gold for delivery in February too fell by Rs 169, or 0.60 percent to Rs 28,178 per ten grams.

As per expert, other than the weakness in demand from local jewellers, a weak trend overseas on higher chances of a rate hike by the US Federal Reserve later this week diminishing appeal for precious metals as a safe haven investment, led to the fall.

At the meeting, which concludes on Wednesday, the US central bank is widely expected to raise benchmark interest rates for the third time this year and comment on the pace of further rate hikes.

Gold is sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion and boost the dollar, in which it is priced.

In the national capital, gold of 99.9 percent and 99.5 percent purity tumbled by Rs 180 each to Rs 29,400 and Rs 29,250 per 10 grams, the lowest since August 5. It had lost Rs 670 in the last five days.

In Mumbai, standard gold (99.5 purity) fell by Rs 135 to close at Rs 28,400 per 10 grams from its overnight closing level of Rs 28,535. Pure gold (99.9 purity) also moved down by a similar margin to finish at Rs 28,550 per 10 grams against Rs 28,685 earlier.

Globally, gold was slightly higher today ahead of the start of a two-day US Federal Reserve meeting, just up from its lowest in nearly five months in the previous session, but lacked impetus to push higher weighed by expectations of an increase in interest rates

Spot gold rose 0.2 percent to USD 1,244.74 an ounce, after hitting its lowest since July 20 at USD 1,240.10 on Monday. US gold futures fell 0.1 percent to USD 1,246.30 an ounce. Spot prices fell 2.5 percent last week, their biggest weekly drop since May.