The Hindu Business Line : Making the most of gold

Even as gold gained overseas as a trusted investment, the market here witnessed a rush to sell by the general public seeking to capitalise on the precious metal's high price.

"There has been a huge selling pressure yesterday and today at the bullion market in Mumbai,'' a gold dealer said.

"Many jewellery retail outlets have been reporting long queues to sell jewellery,'' said another.

Gold touched a high of $ 307 per ounce on the international markets primarily on heavy demand for the precious metal in Japan. According to bullion analysts, the global economic slowdown coupled with interest rate cuts has driven the price of gold northwards.

For the domestic market, the drop in the value of the rupee has further accentuated the upswing in the price of gold and silver. The rupee closed today at an all-time low of 48.70/71 to a dollar.

In Mumbai, the 10-tola gold bar gained Rs 1,800 per bar over the last one week touching a high of Rs 58,550 and finally closing at Rs 58,400.

Standard gold (24 carat) closed at Rs 4,960 per 10 gm, up by Rs 210 from Saturday's closing of Rs 4750 per 10 gm.

Imports have slowed down as landed costs of gold have risen above the domestic price. Landed cost of a 10-tola bar stands at Rs 58,500 while the local market is around Rs 58,200, according to Mr. Madhusudan Daga, bullion analyst.

Several banks have stopped bookings for import of gold. "We have had no bookings ever since gold prices started rising. Buyers have been staying away,'' said an official of a PSU bank in Mumbai.

Though analysts say that gold has yet again demonstrated its strength as a reliable investment in the face of economic uncertainties, Mr Daga cautions that the current northward trend in prices may not be sustainable.

"This rise will not be sustained because there is a clear resistance to buyers. With so much selling pressure, a correction is due both in the domestic as well as international markets,'' he said, pointing out that potential buyers of gold jewellery would now wait until prices stabilised.

"Regular trade has been impacted by the heavy fluctuation in gold price overseas,'' Mr. Daga said.

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