Gold hits new highs, traders expect further rally

The fiery bullion prices in India have surged ahead to new highs tracking the international markets.

In Mumbai, gold (99.50 purity) closed at Rs 6580 per 10 gram while 99.90 gold closed at Rs 6515. Silver (.999) closed higher as well to end at Rs 12170 per kilogram.

In the international markets, spot gold touched a new high $444.60 within a few minutes of trading on Wednesday. On the New York Mercantile Exchange's Comex, the price touched a high of $445.40 within 8 minutes of initial trading.

Gold prices are riding on the weak dollar, which is taking a beating from most of the strong currencies.

In India, while the prices are high, the peak festival demand has declined leading to a dip in the bull run as far as local traders were concerned.

Overseas, traders are looking for new direction from the new US policies towards West Asia.

Market sources said most of the physical players were selling short or had purchased bullion from the Minerals and Metals Trading Corporation (MMTC) at unfixed rates. This indicated they were not very upbeat about the prices going forward.

Analysts said a correction in international gold prices soon appeared likely with the euro's inability to break through 1.3000 psychological level against the dollar.

Historically prices have reversed after every spike, or after minor rallies which fizzled out within a couple of days. The current spikes are expected to lead gold to $450 levels. Most traders warned though that prices were due for a big reversal once these levels were reached.

On the domestic front, Diwali sales were lacklustre.

However, gold imports into India through MMTC was strong, which indicated good stocks for the future.

Purchases in India generally slumped between mid-December and mid-January as the period was considered inauspicious for purchase of gold by Hindus.