Gold hits 3-month high on global trend

Unwinding of positions from other asset classes raises gold's safe haven appeal on escalating geo-political tensions

Gold hit a three-month high in the physical market here on Friday, following a global move as investors unwound their positions in other asset classes to book the yellow metal as a safe haven investment avenue. Profit booking in the final trading hours, however, capped the upward move.

Standard gold at Zaveri Bazaar here surpassed the psychological barrier of Rs 29,000 per 10g at mid-trading session but declined later on profit booking and an up-move in the rupee, to close the day at Rs 28,770 per 10g, a marginal 0.6 per cent rise from Thursday’s close. In Ahmedabad, however, pure gold (.999 purity) jumped by Rs 500 to sell at Rs 29,150 per 10g

The metal moved up by $35 an oz in the last three sessions in the London spot market to trade at $1,322.60 an oz earlier in the day, after US President Barak Obama authorised fresh air strikes in Iraq, adding to geopolitical tension and, therefore, the risk appetite for global investors.

“Global investors are unwinding their positions from other asset classes, including equities, and putting in gold. Also, gold got support from geopolitical tensions further escalated on news from Ukraine. All these incidents made equity markets inversely proportional to gold, resulting in funds moving out of the former asset classes,” said G Thiagarajan, Director, Commtrendz Research.

Profit booking, however, capped gold’s gain in the domestic market. The rupee finally closed with a marginal appreciation at 61.15 to the dollar, compared with 61.23 on Thursday.

Amid escalating geopolitical tensions, crude oil rose marginally to trade at $104.84 a barrel in early Friday trade in the US, compared with $104.76 a barrel on Thursday.

“Rupee depreciation is also helping gold pick up in thedomestic market. Since global equity markets are falling, investors seem to be parking their funds in commodities, mainly gold and crude oil,” said Thiagarajan.

Silver, however, fell marginally by Rs 250 to Rs 44,250 a kg in the domestic market, following the trend in global trade. In London, spot silver was traded at $19.86 an oz on Friday compared with $19.97 an the previous day.

“Physical traders largely remained absent. No fresh buying is happening today. There is a good number of customer influx with exchange of old ornaments with new ones,” said Haresh Soni, chairman, All India Gems & Jewellery Trade Federation.

Customers continued to defer their buying decisions amid expectation of a cut in import duty, which the trade has demanded in several representations to the government. Since a government decision is due, customers feel an import duty cut might be announced any time, which would bring down gold prices.

“Unless fresh buying picks up, the overall jewellery business sentiment will not improve,” said Soni.

Gold for delivery in April 2015 rose three per cent on the the Multi Commodity Exchange to trade at Rs 29,240 per 10g early evening.