Gold hits $700 mark

Domestic spot price rises by Rs 290 per 10 gm to Rs 10,295.

The domestic spot price of gold (of .999 purity) on Wednesday rose by Rs 290 per 10 gm from its previous close to Rs 10,295, in line with overseas spot prices touching a new 25-year high of $703.80 a troy ounce.

US inflation woes, weak US currency, geopolitical tensions in the Middle East and continuing Indian gold buying has boosted hedge fund buying and hence, keeping prices firm.

"Since crossing the $700-a-troy-ounce mark (at about 2000 IST on Tuesday) on Comex June contract, the overseas prices "� spot and futures "� have remained above that mark till now (that is 1800 IST on Wednesday). This clearly indicates strength in price rise of the yellow metal," said T Gnansekar, an independent bullion analyst.

"The rally was initially sparked by the euro's gains against the dollar while the move by the US to reject a letter sent by Iran suggesting 'new solutions' to differences between the two countries set off renewed buying interest," said Kishore Narne, vice-president (research) with Anand Rathi Securities.

Asian prices were firm on Wednesday in line with strong fund buying at the commodity trading division of the New York Mercantile Exchange on Tuesday. However, physical buying in the domestic market saw a huge decline of 40-45 per cent, said traders.

Other factors keeping gold prices firm are rising crude oil prices and the fact that the market is waiting for Barclays Capital to initiate collection for it new investment vehicle in silver.

However, market players expect gold prices to have a breather. "A $30-35 correction taking gold price to about $685 is imminent in the immediate term. In the medium term, however, a rise is expected and allow the metal to touch the 850 an ounce level," said Gnansekar.