Gold surges 2.76% to another high

Domestic price of gold (.999 purity) touched a record high of Rs 10,600 per 10 gm, rising Rs 285 or 2.76 per cent, as overseas spot touched a high of $722 a troy ounce at 1845 IST. At 1845 IST, Comex June contract was at $725 a troy ounce. Silver rose to Rs 22,000 a kg with overseas spot prices rising to $15.03 a troy ounce.

Compared with an average daily demand of 1-1.25 tonne during the marriage season, today's demand was less than 40 kg, said Bhargav Vaidya, an independent bullion analyst.

"We are unable to get market rates in the local market as most dealers are not even calling to get the latest rates. The sudden rise in overseas gold and silver prices is the reason for this," said Suresh Hundia, director of Hundia Exports and former president of the Bombay Bullion Association.

While most market players feel a correction of $30-35 a troy ounce is imminent as both precious metals are highly overbought, they suggest that the upward trend in gold may continue till it hits $730-735.

Apart from other reasons, today's rise in gold prices came largely supported with firming silver prices. Further, rising copper prices towards $8,000 a tonne is pulling up silver prices. Silver, a precious metal with industrial usage is also a by-product from copper mines.

London Metal Exchange's three-month copper futures rose $ 95 or over 1 per cent to US$ 7,910/US$ 7,940 a tonne, topping Tuesday's all time high of US$ 7,875.

Copper prices rose following investment funds'-led buying leading to a rise in demand and concerns over supply disruptions.

US inflation woes, weak US currency, geo-political tensions in the Middle East and continuing Indian gold buying has boosted hedge fund buying and hence, keeping bullion prices firm.

Asian prices were firm today in line with strong fund buying at the commodity trading division of the New York Mercantile Exchange Tuesday.

Other factors keeping gold prices firm are rising crude oil prices and as market awaits for Barclays Capital to initiate collection for it new investment vehicle in silver.

Wednesday evening, the US Federal Reserve had raised interest 25 basis points to 5 per cent, the 16th straight one. While the Fed report talked about "possible increases in resource utilisation, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures," it did not clearly mention if interest rates will be hiked further.

Gold prices have seen an over 42 per cent rise since January this year especially due to tensions in the middle-east following Iran's nuclear ambitions and weakening of the US dollar against other currencies, especially the euro.