Gold hits new 25-yr high on Chinese dollar stance

Domestic gold market stays sanguine, settles at Rs 7,815

Spurred by an announcement from the Chinese government, gold futures perked up yet again to break the 25-year record this morning as it touched the $546 an ounce level.

However, it softened towards the end of the day owing to the closure of the Japanese market, to $542.20 an ounce at 6:20 IST. Spot gold, too, surged to $544.8 an ounce in the morning session and came slightly down to close at $540.53.

Spot gold in India was rather calm just keeping a wait and watch approach towards the international movement. Gold .995 jumped to an intra-day high at Rs 7,840 per 10 gm but finally settled at Rs 7,815, down by just Rs 10 from the previous day close. Gold .999 lost Rs 5 and closed at Rs 7,855 per 10 gm.

The Chinese government announced on Friday that Central Bank of China is preparing to diversify a part of its record $769 billion reserves away from the US dollar and traders are considering gold as a possible option.

In contrast, Prithviraj Kothari, director, Riddhi Siddhi Bullion, and member, Mumbai Bullion Association, is bullish on gold in the short as well as the long term.

"Gold prices may touch Rs 8,000 (per 10 gm) as early as this weekend," he said, reasoning that buying support has been flowing in from all corners of the world.

Bhargav Vaidya, proprietor of B N Vaidya & Associates, felt one should not get carried away by the Chinese announcement, as it lacks credibility.

"The Chinese government says one thing and does another. So, one can't or shouldn't rely on its announcements," he said.

The gold market has opened today; so the trend that the precious metal sets now can be seen only tomorrow. The current scenario is that the dollar is weakening against all other currencies. The yen has strengthened against the dollar quite a bit. So, gold has only one direction to move now "" up, a city-based analyst said.

"We are expecting a correction of $7-8 in the international market and of around Rs 150 in the domestic market in a week," Vaidya said.

There has been a lack of demand for gold in the domestic market today due to volatility in the yellow metal's prices in the international market. Demand has declined over 90 per cent in the last few months.