Gold drops on profit-taking, weak demand; FOMC outcome weighs

Mumbai: Gold prices dropped after two-day up move at the domestic bullion market here on June 17 following fresh bouts of profit-taking by stockists and traders amid a sluggish overseas trend.

Moving with the general trend, silver also plummeted on the back of heavy speculative unwinding coupled with lower industrial off take. Besides demand slowdown, jewellery stockists and investors preferred to book profits ahead of the US Federal Reserve's highly anticipated monetary policy announcement later in the day, a bullion trader said.

Standard gold (99.5 purity) slumped by Rs 155 to end at Rs 26,630 per 10 grams from Tuesday's closing level of Rs 26,785. Pure gold (99.9 purity) also fell by a similar margin to settle at Rs 26,780 per 10 grams against Rs 26,935. Silver (.999 fineness) shed by Rs 215 to finish at Rs 37,390 per kg as compared to Rs 37,605 on June 16.

Globally, the metal came under fresh selling pressure after stronger-than-expected US housing data encouraged speculation that the Federal Reserve will raise interest rates soon against the backdrop of Federal Open Market Committee's two-day policy meeting outcome later in the day. Spot gold was trading lower at USD 1,178.40 an ounce in early European trade, while silver quoted little changed at USD 15.95 an ounce.