Gold crossed $1,600 an ounce on Monday in the London market on consumers’ appetite as a safe haven investment. The yellow metal extended gains on Monday to hit a fresh high record of Rs 23,000 per 10gram in Mumbai’s Zaveri Bazar.
All this as fears ran high among investors that any stalemate in negotiations over US deficit plan could lead to a default, which might wreak havoc in global markets, and send the world’s top economy back to recession.
Gold hit $1,602.4 an oz in early afternoon trade in London and on India’s leading commodity exchange, the Multi Commodity Exchange (MCX), at Rs 23,223 per 10grams for the near-month contract. In the spot Mumbai market, however, standard gold closed with a gain of 1.27 per cent or Rs 290, to close the day at Rs 23,180 per 10gram.
Faced with a huge spurt in the prices of precious metals, in Mumbai, gold was traded at a discount to the imported cost.
According to Suresh Hundia, a leading city-based bullion trader, gold is available at Rs 120 discount to the cost of import in bill, while the same in cash is traded at Rs 60 per 10gram. Silver also is available at Rs 500 per kg discount, Hundia added.
In terms of continuous price increase, the rise in the last 11 days has seen the longest streak in gains since July 1980. The last one decade has been the golden decade for gold prices, during which gold went up 491 per cent, with 19.46 per cent compounded annual returns in the global market. In the domestic market, gold was Rs 4380 per 10gram a decade ago, and has given an annual compounded return of 18.13 per cent. It has seen consolidation for almost four years from 1997 to 2001. It started rising after the September 9, 2001 terrorist attack on US, followed by the economic recession.
Amid indications of another stimulus package by the US Federal Reserve, the global credit rating firm, Moody’s, has warned the country’s rating would be downgraded, in case it pumps in fresh funds into the system for protecting its economy from a possible slowdown.
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“Bullion sales in Mumbai has declined by a significant 70 per cent since the deadly incident occured last Wednesday. Circulation of money has come down resulting into a sharp decline in activities for bullion traders. In fact, a sudden price spurt added sentiment to consumers’ wait-and-watch policy,” said Ketan Shroff, partner of Pushpak Bullion, a local bullion dealer.
On MCX, the most-active gold for August delivery was trading with a gain of 0.47 per cent at Rs 23,180 per 10grams, after hitting a contract high of Rs 23,187 per 10gram.
Following gold, silver was also quoted at $40.16 an oz on Monday, from the level of $39.30 an oz on Friday. Global currency traded in a range-bound fashion, with the rupee closing against the dollar at Rs 44.58 as against Rs 44.52 previous day. Similarly, the euro traded at 1.41 against 1.42 last Friday. Silver closed Rs 2360 higher to close at Rs 59135 per kilo.
According to Barclays’ Capital’s commodity note, “Gold ETP holdings rose by 15 tonnes on Friday, to take total metal held in trust to 2,156.4 tonnes, a fresh all time high, surpassing the previous record set on December 20 last year. Similarly, the latest CFTC data for the week ended July 12 shows tactical investors have increased exposure across the board.”