Gold prices may touch Rs 7,000 by Diwali

INTERNATIONAL REVIEW BULLION

Festive demand and rising prices in international market have pushed up spot gold (.999) prices to Rs 6,435 per 10 gm on Friday, a rise of Rs 35 from Monday's close. Similarly, spot gold (.995) also jumped Rs 20 to close the week at Rs 6,400 per 10 gm.

Silver in the physical market, however, slipped to Rs 10,715 per kg on Friday from Rs 10,735.

"Gold prices are well supported by speculative and psychological buying coupled with surge in euro and dollar upward valuation. Rising crude prices have also helped gold boost substantially", said Harmesh Arora, vice-president, Mumbai Bullion Association. He is also an importer and trader of gold in India running the show in the name of NIBR Bullion in Mumbai.

"Currently gold prices are running at around $449 per ounce in the international market. Once it crosses the benchmark of $452 then it may touch the barrier of $500 per ounce", he added.

"In domestic market, gold would touch upto Rs 7,000 per 10 gm by Diwali this year", he said.

In contrast, spot gold on Friday declined $1.90 on previous PM fix at $446.85 a per troy ounce midday in Europe.Thursday's year high rally of $449.40 per ounce was curtailed by the return of dollar strength and subsequent profit-taking.

The activity was seen muting early on Friday. No scheduled US economic data was released on Friday, but market has started eyeing potential impact of US Federal Open Market Committee's interest-rate meeting scheduled to take place on September 20.

Physical demand for gold is seen picking up ahead of seasonal buying period in India, though interest is seen tapering off as the commodity gets closer to resistance at $450 per ounce.

Spot silver ran into profit-taking following a breach of key resistance at $7.10 per ounce Thursday, and has failed to break $7 per ounce since. Gold futures contract for October '05 also perked up Rs 22 in the comparable week from Rs 6,365 to Rs 6,387 in the end.

Total gold turnover was also seen picking up from Rs 5,213.94 lakh on Monday to Rs 77,059.10 lakh on Thursday and a meagre to Rs 7,599.17 lakh on Friday. Gold, Ahmedabad, too went on growing till it closed at Rs 6,425 from Rs 6,410 in the beginning of the week.

Spot gold on National Commodities and Derivatives Exchange (NCDEX) jumped Rs 25 from Rs 6,406 to Rs 6,431 because of rising consumer demand for fesival season from remote areas. Gold price on NCDEX for October 7 future contracts,however,remains constant at Rs 6,201 throughout the week without any significant development.

Gold futures in New York marked their seventh winning session in a row on Friday, closing 1 per cent above last week. Analysts were touting the possibility of $500-an-ounce gold by the end of the year. By the end of 2005, gold futures prices may climb as much as 10 per cent provided economic conditions show further momentum.

Gold for December delivery closed at $453 an ounce on Friday on the New York Mercantile Exchange (NYMEX), up $2.30 for the session and up $4.50 for the week. The contract, which has been on the rise since August 31, closed at its highest level since March 11.

Hurrican Katrina has affected the US economy badly and the federal deficits are expanding .Fears are that the inflation may rise further and the government may keep the interest rates in a more accommodative environment.Therefore, all signals are indicating the rise in gold prices in future as well.

In order to cash in on the current rising prices of the yellow metal, the Riksbank intends to sell up to 10 tonne of the gold reserve in one year starting from 27 September 2005 to 26 September 2006.

The sale is in compliance with the Central Bank Gold Agreement (CBGA) that 15 European central banks have signed and which came into force on 27 September 2004.

The agreement runs for five years and enables the Riksbank to sell up to 60 tonne of gold in the course of this period. Last year the Riksbank sold 15 tonne of gold under the agreement.

Moving in tandem with other exchanges that trade on this fast moving commodity, spot gold traded on the Shanghai Gold Exchange closed slightly higher on Friday,with the benchmark hitting a 10-week high on bank buying.

The benchmark bullion of 99.95 per cent purity in Shanghai rose CNY0.20 a gram to close at CNY115.45 per gram, or $443.62 a troy ounce, after hitting a 10-week high of CNY115.69 per gram earlier in the day. Government bank in China has already started purchasing lots of gold, especially after the metal's revisit of $450.