Gold moved up by 1.74 per cent to set the new record on Saturday in Mumbai’s Zaveri Bazaar following global sentiment where a bullish trend restored after Federal Reserve Chairman Ben Bernanke’s speech in Jackson Hole raised hope for fresh aid to the US economy.
While Bernanke did not explicitly said anything on further easing, the bullion market is expecting some more measures in the US Federal meeting on September 12-13, which will be a crucial meeting ahead of US Presidential election in November.
Standard gold shot up Rs 535 to close at Rs 31,255 per 10 grams on Saturday from the level of Rs 30,720 per 10 gm the previous day. The yellow metal had earlier set the highest record at Rs 30,920 per 10 gm on July 27. Bernanke on Friday said progress in bringing down US unemployment was too slow and the central bank would act as needed to strengthen the economic recovery. The market is expecting that this is a hint that some more measures to boost economy, which could be in the form of liquidity support, could come in mid-September.
Both in Delhi and Kolkata also, gold price continued its upward march and closed with a gain of Rs 550 and Rs 540 to close the day at Rs 31,725 per 10 grams and Rs 31,715 per 10 grams, respectively. In Chennai, however, the bullion gained Rs 540 to close at Rs 31,575 per 10 grammes at the weekend.
Similarly, silver price shot up 3.76 per cent or Rs 2,180 and surpassed the psychological barrier of Rs 60,000 a kg for first time in six months. The white precious metal closed on Saturday at Rs 60,140 a kg. Silver was last seen at Rs 60,820 a kg on February 29 this year.
“Gold is used as a hedge against the weakening economic environment. The latest speech by the Federal Reserve chairman gives a signal that the US economy requires outside support which Bernanke may announce in the Federal Open Market Committee (FOMC) meeting in September. Till then, euphoria in the bullion market would continue,” said Gnanasekar Thiagarajan, director, Commtrendz Research, a city-based commodity research firm.
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The speech, however, had no surprise element in it. The bullion markets had already factored in the possibility of quantitative easing (QE3). Precious metals remain the biggest beneficiary of the flow of money from outside. In case of QE3, people would have more investible surplus. Hence, bullion prices are going up in anticipation of QE3, Thiagarajan added.
After trading in a range for four months, gold raced toward the $1,700 an ounce (oz) level. Gold in this week showed a down range-bound movement for the whole week waiting for a speech from Bernanke on Friday over further stimulus. As expected, gold hovered showing a weekly close of $1,690 an oz waiving off a negligible weekly loss and surged around two per cent in heavy trading on Friday. COMEX gold futures for December delivery settled up $30.50 at $1,687.60 an oz. The precious metal posted a sharp 4.5 per cent gain in August.
Silver followed the suit. The metal for December delivery rose three per cent to $30.542 an oz in New York, after reaching $30.87, the highest since May 2.
Gold rallied to around $1,790 in February, the highest level so far in 2012, after the Fed at the time said it would keep interest rates near zero until at least the end of 2014. Prices have shed about seven percent since then as there have been no signs of further easing.
A report by Emkay Commotrade, a broking firm, said: “Gold prices followed international gold stronger rupee kept the prices under pressure as the week closed. For the week, MCX gold closed at Rs 31,335 per 10 gm moving 2.45 per cent on the last two days of the week. In MCX, the yellow metal touched its all time high of Rs 31,405 per 10 gm moving in tandem with international market. For the week, MCX gold posted 0.84 per cent gain majorly due to a stagnant rupee compared to last week. The rupee got stronger on Friday over India’s gross domestic product data which stood at 5.5 per cent against 5.25 per cent expected by economists.”
Naveen Mathur, associate director, Angel Broking, however, feels strong US economic data since the FOMC meeting in July raised uncertainty about the QE3 which Bernanke’s latest speech ascertained. Going forward, investors are set to add gold as a part of their portfolio. Hence, slight positive sentiment cannot be ruled out, he added.