Gold is poised to hit a new record in India amid concerns of fresh stimulus packages by major world economies driving up bullion demand as a safe bet against inflation.
“Bullion has already breached the resistance of $1,640 and quotes currently between $1,660-1,670 an ounce (oz) in London. Now, chances are more that the yellow metal would go up further and cross the psychological barrier of $1,700 an oz in the near future, which means around Rs 32,000 per 10 gm in India,” said Rajan Venkatesh, managing director (India bullion), ScotiaMocatta. Meanwhile, a Bloomberg survey forecasts gold to hit $1,800 an oz by the year-end, a 15 per cent rise from the current level.
Gold witnessed its sixth consecutive rise on Monday and closed with a gain of Rs 50 in Mumbai’s popular Zaveri Bazaar at Rs 30,920 per 10 gm. The precious metal has recorded around three per cent increase since last week. The yellow metal has become costlier by 3.5 per cent or Rs 2,000 per 10 gm so far this month.
| The glitter of gold |
|
Gold for immediate delivery fell marginally after hitting the high of $1,676.9 an ounce, the highest since April 13, to trade currently at $1670.1 an oz on Monday. Prices gained 3.4 per cent last week, the most since the week ended January 27. Spot gold reached a record $1,921.15 on September 6 last year.
A report by Barclays Capital said: “Gold has also gained traction over the past week as the euro strengthened and the August FOMC (Federal Open Market Committee) meeting minutes took on a dovish tone. Although economists believe the Fed will refrain from further quantitative easing, gold investor interest has certainly started to crawl higher. Physically backed gold ETPs (exchange traded products) are up almost 40 tonnes in August to record highs.”
Gold has breached its important $1,640/oz cap, but the metal needs to find wider sustained support. The dollar has proved to be a difficult hurdle for gold, and foreign exchange strategists still expect the euro to weaken.
Also Read
The continuous rise in the yellow metal has deserted demand from active buyers. Trading volume in the spot market has declined 25 per cent with only need-based buyers booking afresh. Bullion also got support from the euro’s strengthening move against the dollar due to the German finance ministry’s move to work out a plan in which Greece would be obliged to ask for a temporary exit from the Euro zone. The euro was down 0.5 per cent at $1.2495 after falling as low as $1.2481 on Friday but, recovered a bit on Monday to trade at $1.2527.
Meanwhile, the rupee continued its downward march to close at 55.71 against the dollar, thereby making gold costlier. “The rupee’s depreciation against the dollar is playing a spoilsport with bullion becoming costlier day by day. Consequently, both bulk and retail demand are getting hit badly,” said Venkatesh.
According to Prithviraj Kothari, president of the Bombay Bullion Association (BBA), the rupee has depreciated over 20 per cent this year, making bullion proportionately costlier. Bullion dealers, meanwhile, have started offering discounts in Mumbai by around $10 or Rs 560 per 10 gram to attract buyers.
In the global markets, the European sovereign-debt crisis boosts safe haven demand on speculation of further policy easing by central banks, including the US Federal Reserve, which may be considering a third round of quantitative easing. Investment holdings have expanded to a record on demand for a hedge against inflation.
Surprisingly, scrap sales have also come to a standstill. Consumers of gold are awaiting the price to touch Rs 32,000 – 32,500 per 10 gm, which looks possible, for offloading their holding, said Ketan Shroff, director, Pushpak Bullion, a city–based bullion dealer.
The World Gold Council forecasts India’s gold demand to decline 20 per cent in the second half of the current calendar year on account of rising recovery from domestic sources through scrap recycling. The Council forecast total gold import at 305 tonnes in the second half of 2012, compared to 380 tonnes in the corresponding period last year. The estimated decline in the second quarter of gold imports, however, is 10 per cent of total imports India witnessed in the first quarter at 340 tonnes.