Festival demand pushes up gold

Despite the rupee's appreciation, gold prices have risen on expectations that the upcoming festival season would spur demand for the yellow metal.

Standard gold in Mumbai rose Rs 15 to close the day at Rs 8,905, while in New Delhi, it was up Rs 10 touching a month-high at Rs 8,870 per 10 grams. Pure gold, too, gained Rs 15 today to close in Mumbai at Rs 8,955 per 10 grams.

Gold had strong fundamental support from the steady buying by the local bullion players in the wake of high jewellery inventories and lower overseas demand.

Analysts believe that consumers bought jewellery, fearing the upsurge may continue.

Optimists believe that the buying trend will continue in the coming festive season in September (Janmasthami and Ganesh Chaturthi) as the rupee's appreciation will not affect gold prices that much in the local market as against its global movement.

Rupee appreciated up to 40.76, but soon recovered to the level of 40.98, resulting in the strengthening of gold prices in Mumbai.

The firmness in domestic gold price is largely attributed to a similar trend in London on Friday that percolated by the recovery in New York on Thursday. Gold opened at $668.00/668.60 per ounce, up from $664.70/665.50 late in New York on Thursday.

Gold opened higher in Europe on Friday on the news that gold production has been disrupted at a major mine in Papua New Guinea.

Global trend, which the domestic market follows, depicted a rise of $2.90 to $668.20 an ounce.

The October gold contract was up 0.6 per cent at Rs 8,892 per 10 grams from the previous week close. MCX gold contracts registered a turnover of Rs 6,504.60 crore. Open interest of all gold contracts was 10368 kg and total volume 73,092 kg.

The major driver of gold prices remains high consumption level in India because of high disposable income and a growing economy with a strong GDP, said an analyst.

Gross domestic product in India, the world's biggest gold buyer and South Asia's biggest economy, grew 9.3 per cent in the second quarter compared with 9.1 per cent in the previous quarter.

Industry members believe future sales could be good with prices below Rs 9,000 per 10 grams.

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GOING STRONG

Gold opened higher in Europe on Friday on the news that gold production has been disrupted at a major mine in Papua New Guinea