NEW DELHI: Gold scaled the Rs 30,000 level for the first time in the domestic market as international prices went up on a rush towards the yellow metal with the weakening rupee adding to the burden, according to The Times of India.
Gold prices on Saturday rose by Rs 960 per 10 gram to touchRs 30,300 in Delhi. The highest increase was seen in Chennai, where it jumped nearly Rs 1,100 per 10 gram to reach Rs 30,380. In Mumbai the precious metal was selling at Rs 30,030 and in Kolkata at Rs 30,245 per 10 gram.
Domestic prices went up after gold rose $66 an ounce to $1,626 in New York on Friday on expectations that the US Federal Reserve will take fresh measures to boost the sagging economy on the back of weak employment numbers.
There was an almost instant flight from US dollars — that was seen as a safe haven at a time when investors were choosing to hold cash — to gold, which is back in currency after months of debate over its continued status as an investment bet in uncertain times.
"I won't be surprised if it touches $2,000 an ounce in a few months although the gains would be capped if the rupee begins to strengthen," said Gnanasekar Thiagarajan, director at Commztrendz, a commodities and forex advisory firm.
A flight away from the dollar would mean that currencies such as the rupee could strengthen, provided investors take a favourable view of the local economy and markets.
Bloomberg data suggests that gold will end 2012 above $1,800 an ounce internationally, and inch close to its record high of $1,900 an ounce in the first quarter of next year.
The metal's global price has only risen around 5.5% compared to June 1, 2011, but in India it has shot up by more than 35% over the past 12 months, mainly due to a weakening rupee.
Since June 1, 2011, the rupee has declined by 24% against the dollar. It closed at 55.59 to a dollar on Friday, compared 44.84 to a dollar a year ago.
Many analysts believe that a spurt in the domestic price of gold was the result of Indians preferring to play safe given the policy paralysis that has dogged the economy for several months.
Higher price was one of the key factors for a jump in imports and contributed to a higher trade deficit in 2011-12, prompting the government to levy 4% Customs duty to discourage shipments into the country. It seems to have had the desired impact as imports are shrinking.
The higher price is already deterring homemakers and investors to shun the yellow metal in India and along with the strike by jewelers caused an unprecedented 29% decline in gold sales, which was estimated at a little over 200 tonnes between January and March.
World Gold Council estimated that jewellery sales declined 19% to around 145 tonnes during the quarter, while the demand for coins and bars was down by nearly half to 55 tonnes.
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