Archive for the ‘gold’ Category

SHIFT IN GOLD DEMAND: PERFORMANCE OF ETFs

Gold’s appeal as an alternative investment option remains high. Historically equities have performed better than gold barring certain minor aberrations here and there. However, asset allocation is an important aspect of any investment strategy. By balancing asset classes of different correlations, investors hope to maximize returns and minimize risk. While many investors may believe that their portfolios are adequately diversified, they typically contain only three asset classes – stocks, bonds/fixed income instruments and cash. To counter adverse movements in a particular asset or asset class, many investors now strive to achieve more effective diversification in their portfolios by incorporating alternative investments such as commodities. While gold has shown strong returns over recent years, its most valuable contribution to a portfolio lies in the fact that it is not correlated with most other assets. This is because the gold price is not driven by the same factors that drive the performance of other assets. Demand for gold may continue to rise as investors diversify their portfolio with an asset that is not correlated with the equity markets. In the melt down seen in 2008-09, gold was not correlated with the other assets and hence saved.

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Gold’s price action in the past few months has frustrated many traders. High volatility in prices created much risk for the investors as well as for intra day traders. At this time ETFs plays a major role as Gold ETFs provides investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on stock exchange. Gold ETF would be a passive investment; so, when gold prices move up, the ETF appreciates and when gold prices move down, the ETF loses value. Each unit is approximately equal to price of 1 gram gold. But, there are Gold ETFs which also provide a unit which is approximately equal to the price of ½ gram of gold.

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Gold exchange traded funds (ETFs) serve several functions in both good times and bad. These days, we’re seeing it primarily workingas a safe haven for investors. According to the World Gold Council’s (WGC) latest Gold Investment Digest (GID), the quarter Q2 2010 recorded significant net inflows into various gold backed investment vehicles, as investors sought to harness gold’s investment benefits at a time of weakness and pronounced volatility in other asset classes. Investors bought 273.8 net tonnes of gold via exchange traded funds (ETFs) in Q2 2010. This represents the second largest quarterly inflow on record with the total amount of gold held in the ETFs monitored by WGC to over 2,000 tonnes (worth US$81.6 billion).

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Till now India has been the biggest consumer of gold but gold exchange traded funds (ETFs) were not much popular in India. However, things are changing fast inIndia. With increasing popularity more and more people are now putting their money on Gold ETFs. As a sign of this, India’s gold collection under exchange-traded funds rose 76 per cent in June 2010 from a year ago to 10.453 tonnes. There has been an increase of customers by 70-80 per cent (on year). Most of the participation  was from high net worth individuals and other retail investors. The gold ETFs, instruments that trade like shares and are backed by physical gold holdings, are more than three year old and may get crowded with some other funds planning their entry.

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Over the past nine years, gold has managed to post successive increases in its annual average price, navigating the choppiest of waters.

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From the above mentioned chart it is clearly visible that gold ETF’s has given significant return on yearly basis.GOLDBEES does the best and it does quite well in volumes also, thatis due to the fact that its expenses are lower than the competitors. More competition is always good for the customer, but unless someone comes up with an ETF with expenses lower than GOLDBEES, we can imagine GOLDBEES to be the best on this chart.

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ETF have shown consistent growth in volumes both in terms of number of trade and turnover. Based on the underlying asset different types of ETFs have been identified. The turnover and price of each class of ETF listed on NSE is given below.

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Advantages of Investing in Gold ETFs

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•Potentially cheaper to have price exposure to gold price as compared to other available avenues.

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•Quick and convenient dealing through demat account.

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•No storage and security issue for investors.

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•Transparent pricing.

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•Taxation of Mutual Fund.

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•Can be traded on stock exchange like buying / selling a stock.

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•Ideal for retail investor as minimum lot size to trade is one unit on secondary market.

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•NAV of a unit tracks price of approximately ½ or 1 gram of gold.

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The above mentioned benefits make gold ETFs much better investment avenue for the investors rather than investing in gold through any other source. However as we are seeing that strong investment demand for gold is quite visible, with investors viewing gold, a real asset and as a hedge against medium-term inflationary pressures and potential US dollar weakness. While also providing important diversification benefits, investors may continue to look to gold as a safe haven asset and an alternative currency in the face of volatile currency markets in coming period. Also the rising awareness among Indian investor regarding investment through gold ETFs may boost the demand in near future.

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India World”s 10th Largest Gold-Holding Country :)

The Economic Survey, which was tabled in the Parliament by the Finance Minister today noted that the year 2009-10 witnessed India becoming the world”s 10th largest gold-holding country, from a nation that pledged its bullion two decades ago to pay for imports.

The gold purchase by the government of 200 tonnes from the International Monetary Fund (IMF) took its total reserves to 557.7 tonnes, or about 6 per cent of the total foreign exchange reserves.

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India in 1991 had to pledge its gold to the Bank of England in order to pay for its imports.

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The survey said “Post-purchase, India has become the 10th largest official gold-holding country in the world,”.

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The Reserve Bank of India (RBI) in November last year concluded 200 tonnes of gold purchase from IMF as part of the country”s foreign exchange reserve management operation.

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The purchase, which was executed over two weeks during October, was an official-sector off-market transaction.

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Earlier, Finance Minister Pranab Mukherjee had said that the purchase of gold provided a healing touch to the pride of the nation, which was dented about two decades earlier when the country sold its gold for a few hundred million dollars.

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Meanwhile, the survey sates that IMF”s Executive Board, on September 18, 2009 announced its decision to sell 403.3 metric tonnes of gold as a central element of its New Income Model and in order to increase its resources for lending to low-income countries.

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The IMF also decided that the initial offer of the sale would be directly to official holders, including the central banks. Consequent of this, the RBI concluded the purchase of 200 metric tonnes of gold from IMF, under the IMF”s limited gold sales programme, at the cost of US$ 6.7 billion, in November 2009, as part of its foreign exchange reserves management operation.

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The purchase was an official- sector off-market transaction and was executed over a two-week period during October 19-30, 2009 at market-based prices.

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With this purchase, gold holdings in the country”s foreign exchange reserves have increased to 557.7 tonnes from 357.7 tonnes, which is about 6 per cent of the reserves. Post-purchase, India has become the 10th largest official gold-holding country in the world.

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Stay Tuned for More updates.

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Weekly Update of The Market (08th-12th February)

Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and  latest global business and industry updates.

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Weekly Update of The Market (08th-12th February)

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After starting the year on a good note & Indices making fresh highs within few weeks many Asian markets have corrected between 7 to 10%.

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The global sell off over sovereign debt problems in Europe and an unexpected rise in jobless claims in US put investors on the defensive mode.

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The anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the Euro & has led strength to US dollar.

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Foreign investors sell off is an outcome of dollar-carry-trade unwinding as when they borrowed the dollar was cheap & now it is recovering.

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Investors viewed the markets in year 2010 with confidence in view of recovery gaining momentum is now shaken over the debt problems, nascent economic recovery & confidence of the governments that stand behind the euro.

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Efforts of China to curb lending preventing overheating in economy also pose a risk to derail the global recovery.

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Back at home, the effect of turmoil in the international market also made government to think its strategy on ambitious disinvestment programme.

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🙂

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Lukewarm response to the NTPC, the much awaited issue managed to get subscription of just 1.2 times on its closing day.

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The maximum bid of 20.87 crore shares was put by Indian institution under the first time adopted French Auction route.

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This has challenged the finance Ministry hopes on the proceeds from disinvestments to make up the sliding revenue & rising expenditure.

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While it looks that PSU disinvestment may not yield desired results on market weakness, the 3G auction i.e. expected to garner Rs. 35,000 crore could be postponed to next fiscal year.

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🙂

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The fate of some of the IPO’s like NMDC, Satluj Jal Vidyut Nigam Ltd and Rural Electrification Corporation that are on the disinvestment agenda before March 31, looks tough to sail through, if the stock markets do not rise and big investors do not come back.

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On the contrary, Banks like Bank of Baroda & Indian Bank that were expected to raise money overseas have put now their plans on hold.

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🙂

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The good news from the external sector continued as the data showed a 9.3% annual increase in exports in December to $14.6 billion, a second consecutive month rise.

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While imports increased by 27.2% from a year earlier to $24.75 billion.

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Food inflation remained at high levels & rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week on the back of rising pulses & potato prices.

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Markets are likely to take a closer view of the advance estimates on economic growth for the current fiscal ending March 2010 scheduled to be released on Monday.

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🙂

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In the days to come an activity in the sectors like railways, fertiliser, textiles, pharma, education, power and infrastructure may be seen on expected positive policy announcements and budgetary sops.

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It was clearly mentioned last week that world markets are going in downtrend and one should be careful in such a scenario and that one should be moving in cash.

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Now the markets have taken a very sharp fall last week due to rise in Dollar Index and fall in all asset classes.

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🙂

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The coming week might see some counter rally from lower levels.

Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

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🙂

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If we talk about commodity markets then one can see that strengthening dollar and lack of firm global cues had pressurized commodities prices to move southward.

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Investors are selling riskier assets and putting their money in dollar as a safe haven buying.

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Debt concerns facing Greece, Portugal and Spain coupled with dollar index which is trading above the mark of 80 is most likely to compel commodities to trade lower.

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French and euro zone GDP, USD advance retail sales, USD U. of Michigan Confidence will give further direction to commodities.

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Investors should keep an eye on gold – silver ratio.

It was 58:1 few months back, now reached to 67:1 on MCX, heading towards the level of 70:1.

It is demonstrating more selling in silver.

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🙂

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Stay Tuned for More on weekly updates.

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MCX Comdex & Benefits of Index :)

Hello Friends here we come up with another write up on “SMC Gyan Series”.

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INDEX - The Measuring Barometer

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Topic is  INDEX – The Measuring Barometer.

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Here, we would read that what is MCX Comdex and what are the advantages of Index.

MCX COMDEX captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX.

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It is the significant barometer for the performance of commodities market and would be an ideal investment tool in commodities market over a period of time.

The MCX COMDEX futures give users the ability to efficiently hedge commodity and inflation exposure and lay off residual risk.

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Protection can be established regardless of overall market direction.

MCX COMDEX, India’s first composite commodity futures index was launched on June 7, 2005.

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Advantage:

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Investors who own stocks of companies having exposure to primary commodities could use the COMDEX as a guide to hedge their risk in the commodity exchange, thereby bringing stability to the financial markets and strengthening linkages.

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Weight age (%) of Commodities in MCX COMDEX:

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On the MCX-COMDEX, Agricultural sub-group carries 20% weighting.

It includes ref. soy oil, potato, chana, crude palm oil, kapaskhali & mentha oil.

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Metals also carry 40% weighting and comprise gold, silver, copper, zinc, aluminium, nickel & lead.

The energy sub-group consists of crude oil & natural gas and carries 40% weighting.

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Weight age (%) of Commodities in MCX COMDEX

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Also Group Indices for MCX AGRI, MCX METAL & MCX ENERGY on commodity futures prices have been developed to represent different commodity segments as traded on the exchange.

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🙂

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please Click Here

EQUITY MARKET OVERVIEW JANUARY 2010

EQUITY MARKET OVERVIEW JANUARY 2010

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The year 2009 was an unconventional year with surprises galore.

The sharp recovery in the benchmark Sensex is evident of the same.

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The year came with some shocks and some surprises, be it Satyam opening the Pandora’s Box, government coming to the rescue through fiscal stimulus or gold touching the new highs.


With appreciation of more than 75%, 2009 calendar year emerged as the best year bringing back hope and strengthening the faith and confidence of investors.

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As we welcome the New Year, let’s have a glance at how was the sunset of 2009 with the happenings in the month of December.


The month started with not much action as the indices were little changed as every rise was seen as an opportunity to book profits as fear of rising inflation barred investors from building large positions.

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The India’s industrial output jumped 11.7% in November 2009 from a year earlier, helped by stimulus measures and robust domestic demand.


The momentum in the country’s industrial output is likely to sustain in the coming months.


The facility for Indian companies to buy back their Foreign Currency Convertible Bonds (FCCBs) under the automatic route and approval route would be discontinued from January 2010 due to the improvement in the equity market.

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The central bank said it would allow non-bank financial companies which are focused on financing infrastructure projects to borrow from overseas markets under the approval route.


During the middle of the month, profit taking pulled the key benchmark indices lower.

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The worst monsoon since 1972 and flood in some parts of the country have pushed up food prices nearly to 17.28% annually in beginning of January, while the headline inflation accelerated to 7.31% in December.


The food supplies need to be boosted to stem the price rise as the current acceleration in inflation rate is not only due to loose monetary stance.


The government towards this, has cut the open sale price of wheat, while ministers have pledged to import food items that are in short supply to boost local supplies and stem inflation.

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Dollar also showed strength and sparked fears of unwinding of dollar carry trade.

The Christmas week saw a ‘Santa Claus’ rally that took the market to 19 months’ closing high in a truncated trading week.

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Further, the latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal.

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The corporate advance tax payments for the quarter were up 44% to Rs.48300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.


The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

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Amidst all this, we had the Finance Minister‘s statement that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term.


Towards this the government can even alter the proposed draft for the direct tax code to sustain the high economic growth.

🙂


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Why Commodities Trading? Know Now.. Part 1

Why Commodities Trading? Know Now

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Are you comfortable enough to answer these given questions with certain level of confidence and conviction?

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For example,

What do you think gold prices will go up further?

Are you sure that crude oil prices are going to fall?

Have you heard that the soya crop this year is bad and will result in soya prices going up?


If you think that your answers and predictions have a good chance of coming true and are willing to bet some money on them, you could try your hand at playing the commodity futures market.

You might have heard about stock future trading quite often.

Lets discuss about commodity futures, now..

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The commodity markets have changed a lot from the poky, little hole-in-the-wall trading offices in narrow streets next to crowded markets where traditional dhoti-clad merchants used to trade.


Now India’s boast of 3 major national level commodity exchanges which are :

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National Commodity and Derivative Exchange(NCDEX),

Multi Commodity Exchange (MCX) and

National Multi Commodity Exchange of India(NMCE).

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These brand commodities exchanges have been set up and these are fully computerized.


More and more stock brokers are setting up commodity brokerages as well, and trading volumes in commodity futures is widely predicted to rival the volume of derivative transactions (futures and options) on the stock exchanges.


What’s more, you can also trade online.

🙂


Well  first lets talk on the need and importance of commodities trading.


Why commodities trading?


Well, let’s suppose you want to buy gold because you believe that the price of gold will rise.

You could then buy gold ingots, store them, wait for them to go up in price, and then sell them at a profit.


But, you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide the security, transport it to vault and other such hassles.


Therefore,a far better way to invest in gold would be to buy gold futures from the commodities exchange. This is much advisable step.

🙂


Next Blog we would touch upon issues like how can we do commodity trading, what is the process and how it works. 🙂

Stay Tuned for more and more on this 🙂


However For More latest Industry,Stock Market and Economy News Updates, Click Here

Gold suffers biggest fall of 2009, down by Rs 440

Gold declined by Rs 440, stopping the rising trend of several weeks whereas due to heavy selling by stockist in the midst of weakening global trend, gold lost 2.47% at Rs 17,360 per ten grams in the bullion market.

However, the yellow metal lost Rs 510 on Saturday which is the steepest for the year, taking the loss in the past 5 trading sessions to Rs 1,260 after touching a record high of Rs 18,550 on December 3.

Meanwhile, a similar weakness was seen in silver, which has been under selling pressure ever since the metal in international markets fell from over 19 dollar to trade near $17 an ounce.

On the other hand, silver ready declined 420 to Rs 28,080 per kg and weekly-based delivery by Rs 1,220 to Rs 27,680 per kg on reduced off take by speculators.

Trading sentiment dampened on reports that gold declined 0.2% to 1,125.90 dollar an ounce in Asia while the metal in futures trading also extended losses by losing 1.4% to 1,127.40 dollar an ounce in New York.

Further, standard gold and ornaments fell sharply by Rs 440 each to Rs 17,360 and Rs 17,210 per ten gram respectively while sovereign lost Rs 100 at Rs 14,000 per piece of eight gram.

Silver ready dipped by Rs 420 to Rs 28,080 per kg and weekly-based delivery by Rs 1220 to Rs 27,680 per kg while silver coins tumbled by Rs 300 to Rs 33,700 for buying and Rs 33,800 for selling of 100 pieces.