The Hindu Business Line : Gold prices surge on global cues

Mumbai, Sept 7 Domestic spot gold continued its upward march for yet another day in the local market with the price touching the Rs. 9,200 mark per 10 grams up Rs 130 from the previous day. The rise follows the precious metal’s rally on Thursday in the international market which saw the US benchmark rate breach $700 an ounce for the first time since May 2006. International prices have risen in the wake of higher crude oil prices and strong physical demand in India.

‘No demand’

Some local traders say that the metal has run into resistance from buyers at these levels. “Currently there is no demand but there is profit taking in the market,” said Mr Prithviraj Kothari, Director of RiddiSiddhi Bullions Ltd. Prices can rise up to Rs. 9,500 per 10 gms, he said.

But Mr Suresh Hundia, President of the Bombay Bullion Association, said that any adverse impact on demand would be a temporary phenomenon. One official at a bank which handles bullion purchases felt that demand will be postponed until prices stabilise. Festive demand typically begins a month before Diwali. Mr Kothari agreed with this assessment. “Demand will be restored on account of compulsive festive buying as consumers would get used to higher prices,” he said.

But the trade is also not ruling out a price correction. “Prices would once again correct with gold going below Rs 9,000 per 10 gms,” said Mr Bhargav Vidya of B. N. Vidya, adding that in any case there may not be much impact on demand.

Demand until now this year had been 10 to 15 per cent higher compared to last year, said Mr Hundia. Good buying has taken place when prices of gold hovered at Rs 8,800 per 10 gms and silver at Rs 16,500 per kg recently. India has imported 528 tonnes of gold from January to June this year, according to data from World Gold Council.

The gold futures prices on the Multi Commodity Exchange (MCX) surged to Rs 9,306 per 10 gms for the October contract during trading on the Friday evening session from the previous day’s close of Rs 9,179 per 10 gms.

Volumes on the exchange were substantially higher at 32,000 contracts compared to 29,740 contracts traded during the previous day’s sessions. The total open interest on Thursday was 10,652 for the October gold futures contract on MCX.

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