The Hindu Business Line : Gold prices may firm up on festival demand

STRONG demand for gold and silver is likely to continue this week with robust consumer buying for the ongoing Diwali festival at retail counters across the country, despite rising prices in the global and domestic market.

"Festival demand from consumers and corporates was strong especially in jewellery and coins. I feel strong buying at retail level will continue to drive market this week," a local trader said.

"Demand for gold was strong last week. Total gold sales were nearly 2.50 tonnes last Thursdaybecause of "Guru Pushya Yog", an auspicious day. I think demand will continue this week," Mr Bhargav Vaidya, a bullion analyst told Business Line.

"In the international market, gold prices may rule higher on continued demand. Retail demand is not halted even at higher level. Gold coins purchase by corporates is strong as a gift for Diwali ," Mr Suresh Hundia, President of the Bombay Bullion Association (BBA) said.

Gold futures in New York touched a 16-year peak of $434.30 an ounce on Friday after the dollar tumbled to a record low against the euro. Last week, the gold market was tracking global developments with the US Presidential elections being the major factor responsible for the swing in trends.

Pure gold (.999 fineness) in Mumbai touched a new high (for 2004) of Rs 6,500 per 10 gm on Saturday. Silver prices also crossed the Rs 12,000-mark on Monday on account of robust demand. Mr Vaidya said: "Even at current level, there are more buyers than the sellers at the wholesale counters due to firmness in prices. Overall supply is comfortable. Banks and other nominated agencies have enough stocks on hand."

"Retail gold sales during the Mumbai Gold Festival (October 18-November 17) through 59 leading jewellers are expected to go up to nearly one tonne (valued at Rs 60 crore) in the form of jewellery and coins. FMCG and paint companies are among the major corporate buyers," Ms Madhumita Manna Kulkarni, Manager (West) of the World Gold Council said. The ongoing Mumbai Gold Festival in association with the World Gold Council is a great way to draw attention to the great new designs available in this festive season, she said.