Traders increase bullish bets on bullion with the rising demand trend also shows silver would rise faster
Gold prices on Saturday hit a new all-time high in the spot market here, closing at Rs 32,340 for 10g, up by Rs 190 from yesterday. Silver rose to a five-week high, the price going up by Rs 770 a kg, to close at Rs 63,960 a kg.
The price jump in the past two months is mostly due to the increase in the dollar against the rupee, making import of the yellow metal costlier. Gold has also been in demand in the international market, with several central banks increasing it as a part of their reserves, Brazil’s being the latest.
Interestingly, on Saturday’s cost of import was around Rs 32,800 for 10g but was being sold at a 1.4 per cent discount. This is happening because traders who’ve stocked at lower prices are selling to attract customers. “If this discount widens and remains for a few more days, it incentivises round tripping of gold,” said a veteran bullion trader. When the domestic price is at a discount, traders start buying gold locally to make ornaments for export. For some years, India’s export of gold in the form of raw ornaments is estimated to be 150 tonnes a year. This gets around gold export norms, as export in the form of bars is not allowed.
“On the Multi commodty Exchange, traders increased their bullish bets on gold and silver by adding open interest,” said Ajay Kedia of Kedia Commodities.
He believes that apart from general weakness seen in the dollar, reason for gold to climb up, indications from ratio trading suggest silver will outsmart gold in the coming months, though both would maintain a bullish trend. Ratio trading indicates how many ounces of silver you can buy with one ounce of gold. At present, the ratio is 51.2; he expects by end-December this could fall below 50 and come to 49. Meaning, he says, silver could see Rs 68,000 a kg, while gold will climb to Rs 33,500 for 10g. His target for the ratio for next year is 44.
Gold rallied 11 per cent this year, as investors and central banks bought bullion to diversify assets. Holdings in global exchange traded products, backed by bullion, rose to a record 2,605.3 tonnes yesterday, data compiled by Bloomberg show. Kazakhstan, Turkey and Russia boosted reserves in October, according to data on the International Monetary Fund’s website, joining Brazil, which raised holdings to the highest level in a little more than 11 years.
On Saturday in the international market, gold went up and futures crossed $1,750 an ounce after five weeks. In recent times, the the yellow metal had previously touched $1,755 on October 17. The dollar’s fall was triggered by a new set of data showing an increase in the German confidence index in November and on the speculation that Europe’s policy makers would agree to keep aid flowing to Greece.
Brokerage India Infoline expects a trading range of Rs 31,600-32,850 for gold on the Multi Commodity Exchange, it said in a report.