While everyone pondering about interest rates & exchange outlook. We have seemed to miss the bashing at gold market.
Lack of liquidity had triggered sell off at local gold market. Currently gold is available around 5% under-cost. Just today gold prices came down by Rs1000 to Rs 66,600/Tola, despite $2 increase in gold prices.
On the other hand, cash dollar prices further slashed to 141.5/142.5. Recall during April dollar touched 148/$ at one point
What can we infer from above?
1) Strict vigilance at airports & border has ceased the smuggling of gold & dollars
2) Higher interest rates are forcing de-dollarisation
3) Risk of crack down on cash gold sales has forced reduced demand for gold
If the above trend will sustain then one should expect the diversion of liquidity towards equities.