Gold dips on profit booking to Rs 7,250

Yellow metal seen hitting $500 an ounce overseas soon

Profit booking today pulled down the domestic spot gold price to Rs 7,250 per 10 gram from yesterday's high of Rs 7,440. The fall was in tandem with a similar trend overseas, where spot gold price fell from Tuesday's fresh 18-year high of $495.35/495.55 an ounce to $488.35/488.85 at 1630 IST.

Asian trading today saw heavy profit-booking with Japanese market closed on occasion of a national holiday and Nymex expected to remain lukewarm ahead of a long weekend on occasion of Thanksgiving, starting Thursday, traders said.

Market players however, expect prices to rise again (towards $500 ounce), from Monday, as fundamentals of the yellow metal remain bullish in the medium term.

The bullish trend follows speculative fund buying supported by inflation concerns, news that Russian President Vladimir Putin has affirmed that the country's Central Bank will increase its current gold reserves and a likely rise in crude oil with the onset of winter.

Traders feel fund buying to come in with investors finding gold to be a safe haven following riots in France and other security concerns across the world.

The bullion market also received boost with the latest World Gold Council report suggesting global jewellery demand was seeing an on-year rise of 7 per cent in the third quarter of 2005. Also, the continuous weakening of the euro supports gold price rise with investors preferring investment in gold to currency.

Further, Asian markets, especially India, are bullish on the demand front following the onset of wedding season, that may keep prices higher even though demand gets clogged at such high prices, said Prithiviraj Kotheri, a Mumbai-based trader.

According to marriage planners, over 60,000 weddings are happening in the country today itself.

Domestic gold prices are likely to remain on the higher end following a weaker rupee, which has made imports expensive.

Traders feel the market may rise up to $500 an ounce from next week on and attain the level by the second week of December. The yellow metal had earlier crossed $500 in December 1987 to touch $502. Gold's all-time high was $805 an ounce in early 1980. It is likely to remain bullish before a correction around December-end.