High prices hurt Diwali buying

IN FOCUS/Gold

This Diwali may just end up pinching the pockets of consumers with the international prices ruling at 16-year highs.

While the retail buying has kept the movement of gold steady, there is no investment buying of gold, which is traditionally seen during the Diwali period.

Last week, the gold market was tracking global trends with a hawk-eye view on the US Presidential elections that was a major ruling factor to determine which way the prices were likely to go.

Friday, saw gold futures in New York touched a 16-year peak of $434.30 per troy ounce after the dollar touched record lows against the euro.

This came despite a decent weekly jobs data touching crossing three lakh announced in the US which should have led the prices the other way.

Therefore, international markets saw more buying in the market at higher levels rather than profit-taking at the end of last week. In the local trading, the festival buying kept the market buoyant, and retail buying saw a high of over 5 1/2 to 6 tonne worth purchase in gold on a conservative estimate over the last week since "Guru Pushya Yog", which is considered an auspicious day to purchase gold.

While this would be considered 10 per cent lower than normal years, silver purchase has dropped drastically by over 50 per cent according to traders.

In Mumbai, gold touched a high of Rs 6,500 per 10 gm on Saturday and silver surpassed Rs 12,000 in the beginning of this week.

As far as prices are concerned, bullion consultant Bhargava Vaidya, says that internationally gold is likely to rise another $4 before it corrects by $15 by the end of the month. However, most brokers and traders are bullish about gold prices in the short run.

As the situation stands, Vaidya expects that investment buying would resume considerably once the prices are viewed as being stable, and only likely to move further northward in the future. Extraneous factors however closely determine the price movement.

Currently, all eyes are on the Federal Reserve meeting which concludes today in the US. The expectation in the market indicates that the rates would be hiked in the US, causing investors to keep their fingers crossed about the way in which gold is likely to move.