Gold, silver prices zoom on seasonal demand

Gold prices surged by Rs 305 to Rs 31,930 per ten gram in the national capital on Wednesday on brisk buying by stockists and jewellers to meet the rising seasonal demand amid strong global trend.

Silver prices too zoomed by Rs 1,190 to Rs 50,200 per kg on increased offtake by industrial units and coin makers for coming festivals led by Diwali and ongoing marriage season.

Silver and gold coins, which are normally used for pooja on Diwali and gifting purpose during marriage celebrations, remained in keen demand.

Firm global trend after payrolls in the US climbed, increasing speculation the Federal Reserve will maintain monetary stimulus to boost the economy, also influenced the sentiment, traders said.

Gold in New York, which normally sets price trend on the domestic front, climbed 2 per cent to $1,342.60 an ounce, nearing the highest level since September 30. Silver also climbed 2.3 per cent to $22.79 an ounce.

On the domestic front, gold of 99.9 and 99.5 per cent purity surged by Rs 305 each to Rs 31,930 and Rs 31,730 per ten gram, respectively, while sovereign held steady at Rs 25,300 per piece of eight gram.

In a similar fashion, silver ready surged by Rs 1,190 to Rs 50,200 per kg and weekly-based delivery by Rs 700 to Rs 50,000 per kg. However, silver coins held steady at Rs 87,000 for buying and Rs 88,000 for selling of 100 pieces.

Gold price reclaims Rs 31,000 mark on festive demand

 
Gold price spiked to near one-and-a half-month high and reclaimed the key psychological Rs 31,000 per 10/gm mark at the bullion market here today owing to heavy jewellery stockists demand supported by robust seasonal offtake.
Silver price also surged on the back of aggressive speculative as well as industrial buying.
Price of standard gold of 99.5 per cent purity climbed by Rs 165 to finish at Rs 31,130 per 10 grams from Saturday's closing level of Rs 30,965.

Pure gold of 99.9 per cent purity also spurted by a similar margin to end at Rs 31,280 per 10 grams from Rs 31,115 previously.
Silver ready (.999 fineness) jumped by Rs 700 to conclude at Rs 49,750 per kg as compared to Rs 49,050 last weekend.
Globally, the shiny metal continued its momentum on easing concerns over an imminent withdrawal of the Fed's bullion friendly quantitative-easing measures amid sliding dollar value.
Spot gold was bid higher at USD 1,320 an ounce in early European trade and silver was up at USD 22.18 an ounce. 

Gold falls below $1,300 as Fed stimulus decision looms

 
Singapore: Gold extended losses into a third session on Wednesday, falling over 1 percent to trade below USD 1,300 an ounce, with investors expecting the US Federal Reserve to announce a reduction in its bullion-friendly stimulus measures.

The Fed is expected to begin its long retreat from ultra-easy monetary policy by announcing a small reduction to its USD 85 billion monthly bond purchases following a two-day policy meeting that ends on Wednesday. Many expect a USD 10 billion cut.

Spot gold had fallen 1.2 percent to USD 1,293.69 an ounce by 0217 GMT, bringing the year's losses to 23 percent. It had earlier dropped to USD 1,291.34 - its lowest since August 8.

"It all dependent now on the FOMC," said a precious metals trader in Hong Kong, referring to the Federal Open Market Committee. "It depends on what the language is going to be on their stimulus and what sort of tapering they pursue."

"Gold is still technically under pressure and will probably struggle to go above USD 1,350 again."

Traders said prices would find their next support level at USD 1,270- USD 1,280 an ounce.

Gold, often seen as a hedge against inflation and a slowing economy, benefited when central banks around the world launched stimulus measures to support their economies. The metal hit an all-time high of about $1,920 an ounce in 2011.

But this year several analysts have cut their forecasts for gold prices in anticipation of the US central bank curbing its stimulus measures. Goldman Sachs expects prices to drop to USD 1,050 by the end of next year.

PHYSICAL DEMAND

Due to the volatility in prices, physical demand has failed to pick up rapidly in key consumers India and China. Expectations that prices could fall further once the Fed announces a cut in stimulus have also restrained purchases.

Shanghai gold futures fell 2 percent on Wednesday.

Top gold consumer India increased its import duty on gold jewellery to 15 percent from 10 percent, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry.

The Indian central bank and finance ministry have taken several steps this year to curb bullion imports in an effort to reduce the country's record trade deficit.

Silver and palladium dropped about 1.6 percent, while platinum fell nearly 1 percent.

Why India’s gold has outperformed global prices

Gold price hits fresh all-time high of Rs 35,074 per ten grams in futures trade on Wednesday on heavy buying as rupee plunged to its new record low of 68.85 against the US dollar.

Despite recovering about USD 240 an ounce, or more than 20 percent, since hitting a near three-year low of USD 1,180.71 in late June, gold prices are still down 15 percent so far this year in international market. On the contrary, the yellow metal, which plunged to a low of Rs 25,000 in mid-April, is at a record high in India.

Here’s looking at why gold price in India is spiralling:

Rupee depreciation: The depreciation in rupee has cast a huge impact on the escalation of gold prices as it makes imports costlier. Rupee is down nearly 19 percent so far this year. Hence, gold price in India cannot be at parallels with the price in international market. The difference arising out of the depreciation in rupee has pushed the gold prices higher.

Gold import duty:Gold import duty has also added fuel to the rapidly increasing gold price. In order to contain the widening Current Account Deficit (CAD), the government this month hiked the import duty on gold from existing 8 percent to 10 percent, which has led to a straight jump of more than 600 per 10 gram in gold prices. Prior to this hike, the government had twice hiked import duty from 4 percent to 6 percent and 8 percent respectively.

Geo-political tensions: Geopolitical tensions in Syria are one of the reasons that have immediately triggered the hike in gold prices. Analysts believe that the possibility of US military action against Syria is driving demand for safe-haven assets including gold. Speculations are also doing the rounds that Fed might delay tapering of its bond buying programme if US forces attack Syria.

Low-level demand/ETF buying: In the last two weeks, SPDR gold trust, the world's largest gold-backed exchange-traded fund, has reported inflow, signalling renewed interest of market players. Apart from ETF buying, low-level buying also stoked up prices.

Central Bank’s buying: International Monetary Fund (IMF) data has showed that central banks continued to add to their gold reserves. Turkey added the most by buying 22.5 tonnes of gold in July, while Russia's holdings topped 1,000 tonnes. The accumulation of gold by the central banks has underpinned demand for gold, which in turn has strengthened the metal’s price.