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Gold spot surges, futures drop

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Dilip Kumar Jha Mumbai
After touching the psychological barrier of Rs 10,000 on Saturday and opening high today, standard gold maintained its strength till late afternoon and ended the day at Rs 10,070 per 10 gm at the Bombay Bullion Exchange.
 
But the yellow metal futures failed to continue its momentum following profit booking at highs. The near-month contract slipped to Rs 9,830 in the early evening trades on the MCX.
 
The near month contract is very liquid owing to geopolitical position in the Asian region. Traders remained hesitant to go in for major new investments owing to escalating tension in West Asia.
 
In addition to energy, gold requires currency support which is lacking now. Major currencies such as yen and euro has weakened today. Apart from that, the rupee too has weakened drastically. "Despite all these, the yellow metal is in bull phase now," said Bhargav Vaidya, an analyst with B N Vaidya & Associates.
 
Earlier, gold prices rose as fighting intensified in West Asia, the second-largest buyer of the bullion, and United Nation's Secretary-General Kofi Annan said he's working to deploy an armed force to stop the conflict. The yellow, which touched a 26-year high of $730.40 an ounce in May in London, has risen 5.3 per cent since the conflict between Israel and Hezbollah began on July 12. Kofi Annan had said he is holding talks with the five permanent members of the UN Security Council to secure their backing for an armed force to quell the violence.
 
"Gold price may push past $700, if things get out of control in the West Asia, it could go higher than that,'' an analyst said.
 
In rupee terms, gold price may cross Rs 10,500 per 10 gm this week despite the price started sliding down.
 
Gold has jumped 9.6 per cent so far this month amid rising energy prices and escalating tensions over Iran's nuclear program, North Korean missile tests and bombings in India. Crude oil reached $78.40 a barrel on July 14, the highest intraday price since trading began in 1983.
 
"We would experience high volatility in the precious metal, industrial metals and energy counters today. Geo-political concerns remain a huge risk and the main cause of this sudden volatility. We would experience big up moves and down moves in all the mentioned counters," said Suresh Nair, vice-president, Kotak Commodity Services.

 
 

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First Published: Jul 18 2006 | 12:00 AM IST

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