Gold rally hits Rs 8100

Yellow metal sees 20 per cent price rise this year

Standard gold hit an all-time high on Monday in Mumbai bullion market to close at Rs 8,100, a gain of Rs 170 from its previous close.

Gold 99.9 also gained Rs 170 to close at a fresh high of Rs 8,145. The rally in gold has lifted the yellow metal's prices by over 20 per cent this year.

"Geo-political disturbances have had a significant impact on gold prices on all occasions and the present growth is no exception. London blasts are probably the only reason for this fresh spurt in gold prices in the domestic as well as international markets," said Bhargav Baid, proprietor, B N Vaidya & Associates.

In international markets gold started the day on a bullish note and touched $540 in spot market in the afternoon and touched its highest level in nearly 25 years in Asia on renewed fund buying, especially in Japan, resulting in a rise of more than 20 per cent since the beginning of 2005.

Fund managers are buying gold, as part of a strategy to diversify portfolios, due to concerns about rising energy costs, fear of terrorist attacks and expectations of a fall in dollar prompted by US trade and budget deficits. A build-up in long positions in New York failed to dent the bullish outlook in gold and dealers said fresh buying had offset profit-taking in the last few days.

Market sentiment is beyond projection as investment option is driving demand up from all corners of the world despite falling jewellery demand. Gold hit a record high of $850 an ounce in January 1980.

The net long position in Comex gold climbed to 167,413 contracts for the week ending December 6 from 1,58,905 contracts as of November 29, the US Commodity Futures Trading Commission's latest Commitments of Trades report showed.

"The bullish sentiment in gold market is expected to continue, but a clearer picture will emerge after December 23, when the international leaders would finalise their books of accounts for 2005," Baid said.

On the Tokyo Commodity Exchange, the key gold futures contract rallied by its daily 50 yen limit to 2,155 yen per gram, the highest since December 1987 as a weak yen and persistent concerns about inflation sparked off fund and investment buying.

Speculation about potential purchases from some of the world's central banks, previously long-time sellers, also supported gold prices even as analysts maintained that banks were not expected to buy at such high prices.

"Domestic demand for jewellery has come down by more than 90 per cent, but retail demand continues to stay firm," said an analyst.

Gold prices are also supported by the rising physical demand which is expected to rise to 3,957 tonne in 2005 from 3,840 tonne in 2004, while mine production is expected to see a modest 34 tonne rise.

JUST FOR KICKS....
Domestic demand for jewellery has come down by more than 90 per cent, but is still continuing as an Indian lady can accept anything but not to remain without gold," said an analyst.