MUMBAI: Gold prices in Mumbai hit a new high on Wednesday, tracking the movement of overseas gold, which was catapulted to an 18-month high at the time of writing by a weak dollar.
As the US currency slipped, investors pumped money into gold and stocks on hopes of a global economic recovery. In the international market gold $1019.17 an ounce (31.13 gms).
In India, gold of 995 purity, which is primarily used to make ornaments, surged to Rs 15,980 per 10 gm, up Rs 195 from Tuesday’s close, while 999 purity shot to Rs 16,060 per 10 gm, up Rs 200 from its previous close.
The US dollar slumped to a 9-month low of $1.47, against the euro, as investors moved out of the safe-haven currency and into riskier assets such as stocks and commodities. The slump in the dollar boosted gold, as demand for the dollar-denominated asset increased from holders of other currencies.
Analysts and jewellers agree that hedge and commodity fund buying could prop gold to newer highs in the coming days. They are, however, divided on the impact of high prices on demand for the metal ahead of Dusshera. Rajesh Mehta, chairman of Bangalore-based gold jewellery manufacturer Rajesh Exports, said: “Demand for jewellery has been hugely impacted by the rising price. This is just a speculative frenzy and prices should rationalise at saner levels within a month or two.”
However, Kumar Jain, a jeweller in Zaveri Bazaar, Mumbai’s gold market
, said high prices notwithstanding consumers are buying on fears that the price could rise further.
Supporting Mr Jain’s argument, a Mumbai-based analyst said the price was moving up on rumours of buying by central banks in the US and Europe. “It is likely that we will see records being broken in the coming weeks,” he said. India, which consumes between 700 and 800 tonne of gold annually, is a price taker and events in the international market influence gold prices here.
Last Tuesday, 995 purity gold in Mumbai shot up to an earlier high of Rs 15,875 per 10 gm. The price, however, corrected subsequently, as investors decided to book profits.
Source : The Economic Times