Gold rally hits Rs 9100, silver at Rs 20,500

Iran tension, record crude prices keep metals on an upswin

Domestic gold and silver prices on Tuesday rose to new all-time highs in tandem with spiralling overseas prices of metals and crude oil due to Iran tensions, inflation woes and in anticipation of new investment vehicles in crude oil and silver.

Spot gold price touched a high of Rs 9,100 per 10 grams, from previous close of Rs 8,955 as overseas spot gold rose to a new 25-year high of $618.28 a troy ounce.

As the white metal overseas price touched a new 24-year high of $13.79a troy ounce, domestic silver price was at Rs 20,500 per 1 kilogram from yesterday's Rs 20,155.

Crude oil spot prices on Tuesday touched a high of $72.20 a barrel from yesterday's $70, and nudging closer to the all-time high $70.85 set on August 30, 2005. Following spiralling prices, gold and silver domestic demand for fresh sale has been hit drastically.

For instance, "six months ago, if on an average day, banks were importing gold worth $40-50 million, they are now importing gold worth $1.5-2 million", said T Gnansekar, a Mumbai-based independent analyst.

Banks and dealers are seemingly hesitant and sceptical about the immediate demand, which is lacklustre due to high prices and phenomenal volatility, said head of a Mumbai-based brokerage.

With the market witnessing a marriage season, hoarded gold is out and jewellers are busy recycling it, said Rajesh Saraf, a Delhi-based jeweller.

Gold prices are seen firm in hope of good demand in the ongoing wedding season, which started April 12 and with Akshayatritiya, an auspicious occasion to buy the yellow metal, on April 30.

"With worries that mounting tension between the US and Iran over Tehran's nuclear ambitions may disrupt oil supplies in the West Asia and market awaiting new investment vehicles in crude oil and silver, the price rise is expected to continue further," said T Gnansekar, a Mumbai-based independent analyst.

Funds and other institutional players are shifting their investments to precious metals, especially gold with is considered to be a good hedge against inflation.

With inflation woes in mind, marketplayers are also awaiting minutes of the US Federal Reserve's March meeting for fresh light over the central bank's intent to raise interest rates beyond an expected raise in May 10 meeting, said V. Sivaramakrishnan, executive director with Dubai-based Kombench DMCC.

In a bid to tackle with rising inflation, market expects the US Federal Reserve to hike interest rate by another 25 basis points, to 5 per cent in its upcoming meeting on May 10. The Fed has lifted rates 15 straight times to 4.75 per cent.

Market players expect gold to surge to $621 a troy ounce level and silver to at least touch $14 a troy ounce before it looks for fresh direction.