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| Dollar fall pushes up gold prices by 11% |
| BS Reporter / Mumbai Sep 19, 2008, 03:41 IST |
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AIG bailout leads to the greenback’s fall.
Gold prices in the local bullion market on Thursday shot up by Rs 1,265 to close at Rs 13,020 per 10 grams, rising by 10.76 per cent, following global cues. International prices of the yellow metal rose yesterday after the US Federal Reserve moved in to bail out ailing insurance major AIG.
The rise in prices has come as a boon to investors who had begun mopping up the yellow metal when it was on the decline in the recent past, promising them good returns. However, a majority of the traders in the futures market burnt their fingers on Thursday as they had built up huge short positions, expecting a fall in gold prices.
The October gold contract on MCX closed at Rs 12,746 per 10 grams on Wednesday’s late-night trading session, rising by 8.85 per cent over the early session close of Rs 11,710. On Thursday the October futures closed at Rs 12,994 in the first session of trade.
The bailout of AIG led to a fall of the dollar and prompted investors and traders to rush for gold as a safe-haven investment.
The rise took a steep turn on reports of a decline in gold mine output. Thursday’s jump in prices is historic in absolute terms in the history of the Indian gold market, said bullion analyst Bhargav Vaidya.
Demand for the precious metal has dropped with the price crossing Rs 13,000 said Suresh Hundia, president, The Bombay Bullion Association, a body of Mumbai gold jewelers.
International prices, which corrected upwards since Wednesday night trade, have been rising on MCX as a result of short-covering, said Ajay Kedia of Kedia commodities.
Silver prices also followed suit, rising by 9.51 per cent on Thursday to close at Rs 20,660 a kg.
Gold prices may go up further from the current level, but it is unlikely that the record high level of March 2008 will be broken this year, said London-based consultancy Gold Field Minerals Services (GFMS).
“A further bank failure or two in the next few months cannot be considered as surprise. Add that to an unwinding of dollar gains and you should see gold back over $900, and maybe $950,” said Philip Klapwijk, executive chairman, GFMS.
In London, gold was was trading at $869 an ounce on Thursday against $783 an ounce late on Wednesday evening.
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