Gold slips on strong Re

An appreciating rupee pulled the domestic gold prices down today, even as the yellow metal hit a new high in London. The strong rupee resulted in the domestic gold shedding its early gains and defying the global market rally.

Gold climbed a new peak in London and was poised to scale the 28-year-high level on safe-haven buying and a sharp drop in the dollar after the US Federal Reserve slashed interest rates.

Standard gold in Mumbai closed at Rs 9,470 per 10 grams, down Rs 25 from the previous close. Pure gold too lost Rs 10 and ended the day at Rs 9,510 per 10 grams.

The yellow metal surged early on Wednesday "� with the standard gold touching Rs 9515 per 10 grams, while pure gold rose to Rs 9,560 "� following the global trend. However, heavy dollar inflows on the back of a strong FII buying in the stock market led to a surge in the rupee and spoilt the domestic gold party.

The rupee closed higher against the dollar on Wednesday at Rs 40.21, up 28 paise over Tuesday's close.

Spot gold touched $726 an ounce, its loftiest level since May 2006, before easing to $723.35-724.05 by 10:06 GMT, against Tuesday's late New York levels of $719.30-720.30.

A 50 basis points cut in the benchmark interest rates announced by the US Federal Reserve on Tuesday to boost the US economy pushed the dollar to a 15-year low against a basket of currencies on Wednesday. The weak dollar spurred gold importers, especially in India, to build their stocks to meet the festive demand.

The festive season demand, which begins with Ganesh Chaturthi, continues till the wedding season in April. The Indian currency has appreciated by 10 per cent against the dollar in the last one year, fuelling the import of the yellow metal as the strong rupee makes gold imports cheaper.

"The demand for the yellow metal is still encouraging as consumers are comfortable with buying gold at a higher price," said Ashok Minawala, chairman, All India Gems and Jewellery Trade Federation. Stockists were piling up the yellow metal, while a section of consumers kept away from the market, waiting for a price decline, said Minawala.