Traders rush to capture the benefit of white metal rally.
Silver started quoting at a discount to the cost of imports in Mumbai’s spot market due to selling pressure, as prices of the white metal spurted in the last few days. Despite the discounts, there were few takers for the metal. The extended holiday in India’s largest spot bullion market, which transacts daily business worth Rs 500 crore, further affected demand.
Prices in the London spot market shot up by 15.32 per cent last week to close at $35.30 an oz on Friday. In India, prices went up 8.56 per cent to close at Rs 57,430 a kg on Saturday, the highest level since September 27. Prices were quoted high at Rs 58,300 a kg, but profit booking by stockists pulled the metal down by Rs 900 to Rs 57,430. The price was still Rs 3,440 more than the pre-Diwali level.
“Traders waited for a price spurt in silver for over a month. Since the current price rise looks unsustainable, they rushed to the market for profit booking, even at a discount (compared to the cost of imports) of Rs 1,000 a kg,” said Lalit Jagawat, proprietor of Nakoda Bullion, a member of the Bombay Bullion Association (BBA).
Amid brisk buying by stockists to make ornaments for the ensuing wedding season, gold and silver recorded a sharp spike in the last couple of days.
Buying from both industrial units and speculators supported the move. The trading sentiment turned bullish, as gold rallied in global markets after European leaders agreed on a plan to contain the region’s debt crisis.
In Delhi, gold hit the psychological barrier of Rs 28,000 per 10 gm, a rise of Rs 110, on Friday, while silver moved up by Rs 2,300 to Rs 58,300 a kg. The bullion markets in Mumbai remained closed on Friday due to Diwali.
The trading sentiment suddenly turned bearish in Mumbai on concerns of easing euro zone debt crisis, which might dampen demand for the precious metals as an alternate investment. Consequently, along with silver, gold prices plunged on Saturday. Gold in Mumbai closed at Rs 27,490 on Saturday, which was Rs 27,600 on Muhurat trading on Diwali.
The current profit booking is in sharp contrast to the conventional wisdom that suggests extensive fresh purchases of precious metals like gold and silver on the occasion of Diwali.
While silver was sold at a discount to the landing cost of imported commodity, gold remained at par with the imported one.
“The undercosting is expected to be short-lived with ‘active’ traders returning to the market next week. Hence, those traders who had booked the metal at the recent low of Rs 52,000-53,000 a kg, are booking the profit, while others, who had booked on highs of over Rs 60,000 a kg, are still holding their portfolios,” said Suresh Hundia, director of BBA.
Gold in New York fell 0.1 per cent to $1,747.20 an ounce, after touching a high of $1,754. Retailers, meanwhile, refrained from fresh purchases to avoid any possible loss in the current volatile market.