Silver surpassed the benchmark of Rs 60,000 a kg in Mumbai’s Zaveri Bazaar on Friday, rendering physical buying negligible. The metal closed at Rs 60,125 a kg — a rise of Rs 1,045 a kg, or 1.77 per cent, over the previous day’s close. Standard gold also moved up, in line, by 0.52 per cent, or Rs 110, to close the day at Rs 21,090 per 10 grams.
The physical demand was severely hit due to the rise in price. In the last five trading sessions, prices have shot up 5.7 per cent, or Rs 3,255 — a trend seen 31 years ago, when the Hunt brothers were cornering the metal.
“There has been no physical demand. Although some industrial and consumer demand continues, volume players like stockists have remained totally absent from the market in anticipation of a correction,” said Bhargav Vaidya, an analyst with B N Vaidya & Associates.
The European Central Bank (ECB), for the first time in almost three years, decided to raise interest rates by 0.25 per cent last Thursday. This indicated that inflationary pressure remained a cause of concern for the entire European region. As a result, the euro strengthened, weakening the dollar. This had to support precious metals, said Vaidya. China also raised interest rates 0.25 per cent on Thursday.
Meanwhile, brokerages have started advising their clients caution while trading in precious metals, as they feel prices have overheated and an imminent correction is overdue.
“We have advised our clients to remain cautious in both highly tradable precious metals, including gold and silver; and take a fresh position with care,” said Gnanasekar Thiagarajan, director, Commtrendz Research.
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Thiagarajan said the alert was given to members on the basis of the fact that growth always had a peak point. The precious metals have already hit these points. Though fundamentals favour a further spike in prices in both quarters, a correction could be imminent. He forecast gold and silver to touch $1,495 an oz and $42 an oz, respectively, before heading for a correction. All industrial commodities, including crude oil, base metals, etc, had been supporting the move of precious metals currently, he added.
In London, spot gold rose as high as $1,472.96 an ounce in early Friday afternoon, against $1,457.45 in New York on late Thursday. Similarly, silver was bidding at $40.21 an ounce, against $39.51 — having risen as high as $40.26 earlier.
Meanwhile, oil climbed to its highest level in 30 months, as supply cuts stemming from attacks on Libyan oilfields offset demand concerns, spurred by a major aftershock in Japan. Crude oil was at $111.59 in early evening trade.
The gold:silver ratio — the number of silver ounces needed to buy an ounce of gold — fell to a 28-year low to about 36 on Friday.