Gold futures in India, the world's biggest buyer of the metal, dropped 3 per cent on Monday to hit their lowest level in 15-1/2 months. The key gold contract for June delivery on the Multi Commodity Exchange fell to Rs. 27,100 per 10 grams, the lowest level since December 30, 2011. Globally, gold prices plunged to $1,427 an ounce, their lowest since April 2011 today.

Here are the reasons behind the sharp selloff in gold:

• Supply may rise: Cyprus is planning to sell gold reserves to raise around 400 million euros to help finance a bailout. This has raised concerns that other indebted euro zone countries like Italy, Spain and Portugal could follow suit. As a result, investors have cut exposure to gold, with total holdings at the world's major bullion gold-backed exchange-traded-funds falling to their lowest since early 2012.

• Inflation moderating: In the U.S., the world's largest economy, wholesale prices fell in March by the most in 10 months. Since gold is regarded as an inflation hedge, any indication that prices aren't rising has prompted investors to sell gold. 

• Interest rates may go up: U.S. interest rates might edge higher sooner than previously thought. This will tend to strengthen the dollar and weaken gold, since another reason investors buy gold is to hold it as an alternative to U.S. dollars. When traders expect the dollar to rise, they will sell gold. 

• QE ending sooner than expected: Minutes from U.S. Fed's policy meeting suggest the quantitative easing programme could draw to a close by year end, earlier than some economists had expected. This has led to panic selling in gold. 

• Risk-on trade: Investors have been flocking to equity markets for better returns. The Dow Jones Average in the U.S. is trading near its all-time high indicating increased participation in the equity markets. 

• Market analyst Sarvendra Srivastava told NDTV that gold has support at $1380-1400 an ounce, but if these levels are broken, another round of sharp selling may emerge. This is the fag end of a decline in gold and silver, Mr Srivastava said, adding that another Rs. 300-400 of the downside in gold is possible.

source-NDTV (profit)

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New York: Gold had its biggest one-day drop since 1983 on Monday as a selling frenzy that began last week picked up speed.

The price of gold plunged $140.30 to $1,361.10 an ounce, a decline of 9 percent. The metal has dropped $200 an ounce, or nearly 13 percent, in the last two trading days. It's the lowest price since February 2011. Prices recovered marginally on Tuesday, up 1 per cent.

The sell-off started Friday when the government reported a drop in inflation. Investors often buy gold when they're fearful of rising prices and sell it when they see inflation ebbing.

A proposal last week that Cyprus sell some of its gold reserves to support its banks also spooked investors, leading them to worry that Spain, Italy and other weak European countries might flood the market just as demand for the metal is weakening.

After the sharp drop last week, the rush of selling started to feed on itself Monday as worried traders hurried to get out of the market.

"This is panic, this it isn't organized at all," said Phil Streible, a senior commodities broker at RJ O'Brien Futures.

Worries about slowing growth in China also pushed down industrial metals and the price of oil and other commodities.

Gold is often thought of as a safe-haven investment, a place to park money when investors are fearful of turmoil in other markets, inflation, weak economic growth or depreciation in the value of the U.S. dollar.

It rose sharply in the past decade, from less than $330 ten years ago to a peak of $1,900 an ounce in August 2011 during the market turmoil that followed a downgrade of the U.S. government's credit rating.

Part of the rise in recent years can be attributed to more investors putting money into gold and speculating that the price will continue to rise. Some investors also bought gold as an alternative to holding dollars on the belief that the Federal Reserve's economic stimulus program would weaken the U.S. currency.

George Gero, precious metals strategist at RBC Capital Markets, said the possibility of European central banks selling gold was especially worrisome since there were fewer nations interested in keeping gold reserves these days.

"There aren't many other countries that want to buy," Gero said. "In the past you saw Mexico, Russia, China, Turkey and other central banks buying gold, but right now there seems to be more of a need for dollars."

Gold has been declining from a recent high of $1,792 on Oct. 4 as the outlook for the U.S. economy improved, diminishing the metal's appeal as a safe haven investment. Since then it's down $431, or 24 percent.

Some Federal Reserve officials have also been calling for an early end to the central bank's bond-buying program. If that happens, it would likely cause U.S. interest rates to rise, resulting in a stronger U.S. dollar. That would give traders another reason to sell gold, since they see the metal as an alternative to holding dollars.

Silver fell even more than gold, by 11 percent. Silver lost $2.97 to $23.361 an ounce, its lowest price since October 2010.

Industrial metals also fell after China reported that economic growth slowed unexpectedly in the first three months of the year. The world's second-largest economy grew by 7.7 percent over a year earlier, slowing from the previous quarter, and short of many private-sector forecasts that growth would accelerate slightly to 8 percent.

Copper, which tends to follow the outlook for global growth, dropped 7.7 cents, or 2.3 percent, to $3.27 a pound.

Palladium dropped $42.10, or 5.9 percent, to $667 an ounce and platinum dropped $71.10, or 4.8 percent, to $1,424.80.

Agricultural futures also ended lower. Wheat fell 21 cents to $6.9375 a bushel, corn fell 11.75 cents to $6.4675 a bushel and soybeans fell 18 cents to $13.95 a bushel.

Crude oil dropped to a four-month low, as the slowdown in China's growth added to doubts about the strength of the world economy and global demand for crude.

Benchmark crude fell $2.58, or 2.8 percent, to finish at $88.71 a barrel on the New York Mercantile Exchange.

In other futures trading on the Nymex:

- Wholesale gasoline fell 4 cents to finish at $2.76 a gallon.

- Heating oil dropped 4 cents to end at $2.83 a gallon.

- Natural gas fell 9 cents to finish at $4.14 per 1,000 cubic feet.

source -NDTV  (profit)

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The verdict could impact actor Sanjay Dutt, who was convicted for illegally possessing an AK-56 supplied by men convicted for the terror attack. The court had ordered him to return to jail by April 18. Yesterday, Mr Dutt asked for another six months so that he could finish shooting Bollywood films.

Those whose petitions were rejected today - two convicts in addition to Zaibunnisa had said that they are too old and sick to handle a jail sentence and that their petitions for pardon are pending with the President of the country.

Mr Dutt, who is 53, was given a five-year sentence by the Supreme Court last month, but because he has already spent 18 months in prison before being granted bail in 1995, he will spend a little over three years in jail.

At an emotional press conference last month, Mr Dutt said he would accept the verdict and surrender to prison authorities before his deadline.

He was found guilty by the Supreme Court of possession of an automatic rifle and a pistol, which he insisted were only meant to protect his family. The serial bombings in Mumbai in 1993 killed more than 200 people and nearly 700 were injured.

source-NDTV

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