Gold hits Rs 12K on weak rupee, global cues

Gold hit an all-time high, breaching the Rs 12,000 mark, in the spot bullion market in Mumbai on Wednesday primarily as a result of the rupee depreciation and firm guidance from the global market.

Spot gold in Mumbai opened firm on Wednesday at Rs 12,010 per 10 grams, recording a rise of Rs 360 from the previous closing on Monday. The Mumbai market remained closed on Tuesday on account of Chhatrapati Shivaji Jayanti.

In the absence of buyers, gold was range-bound throughout the day. Pure gold too closed with a gain of Rs 360 at Rs 12,060 per 10 grams from Rs Rs 11,700 on Monday.

In Delhi, standard and pure gold closed with a gain of Rs 200 each at Rs 11,980 and Rs 12,040 per 10 grams respectively on Wednesday.

"This is a magical barrier and precious metal investors should start booking profits," said Bhargav Vaidya, a bullion analyst at Mumbai-based BN Vaidya & Associates.

A combined effect of high crude oil prices, gold breaching $930 on Tuesday in London and the rupee falling by 2 per cent in the last two days, were the major drivers for the precious metal surging up, he added.

Consequently, the domestic demand has dried up. India consumes 73 per cent (558.2 tonnes) of the yellow metal through jewellery. The country has recorded a drastic decline in gold imports in January as consumers abstained from fresh buying.

In January, India'a gold imports slumped to a record low of a meagre 4 tonnes compared with 87.69 tonnes in the same period last year. The total retail demand for gold in the country was 773.6 tonnes in 2007 compared with 721.9 tonnes in the previous year.

There was absolutely no demand, said Ketan Shroff, a trader in Zaveri Bazar, Mumbai's gold trade hub, and added that retail investors had been offloading the yellow metal instead.

Scrap arrivals to the market, especially from retail investors have jumped 300 per cent from 15-20 tonnes a day earlier to 75-80 tonnes now.