Robust festive season buying propels gold to five-year high of Rs 31,900

The price of standard gold hit its highest in five years at Zaveri Bazaar here, following a sharp increase in the international market and robust consumer demand this festive season.

Data from the India Bullion and Jewellers Association (Ibja) showed standard gold was at Rs 31,900 per 10g in the spot bullion on Monday, up nearly 0.6 per cent from its previous close of Rs 31,735 per 10g. The rise has been on for four days in a row.

Silver also rose here, to trade at Rs 38,540 a kg.

The jump in gold indicates renewed consumer interest as a safe-haven investment avenue amid a volatile stock market, continuous depreciation in the rupee against the dollar, sustained rise in crude oil prices and uncertainty on real estate. Disappointing short-term returns in other investment options, including equities, has prompted investors to take advantage of the current low gold prices abroad.

“Robust buying sentiment was seen on Monday after the 15 days of inauspicious Shraddha Paksha which ended immediately before start of Durga Pooja. Consumers were holding on fresh purchases ahead of Durga Pooja and Diwali, amid expectation of a price fall. But, a depreciating rupee has kept prices elevated in the local currency. While Monday’s price rise would pause consumer sentiment temporarily, enthusiastic purchase would come back after a day or two,” said Kumar Jain, director at Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer at Zaveri Bazaar.

In the international market, gold hit an early three-month high on Monday, at $1,231 an oz, a one per cent increase from the previous day’s close. The ongoing trade war between America and China has hit global business transactions.

The recent global equity markets’ sell-off has prompted investors to seek refuge in gold, resulting in the sharp price.

“Gold eased on Friday on profit-taking, a day after achieving its biggest one-day rally in two years. But, support remained solid above the $1,200 an oz level from safe-haven demand, triggered by the recent weakness on Wall Street and spike in US treasury yields,” said Manoj Kumar Jain, head of commodity research at financial services company IndiaNivesh.

Preliminary data compiled by precious metals consultancy GFMS showed India’s gold import declined by 14 per cent in September, from reduced demand on currency depreciation.

“The rupee has been consistently falling against the dollar. This is very risky for domestic corporates which have non-rupee denominated assets, either directly purchased or forming a part of their production value chain,” said Ranjan Chakravarty, consultant at the Metropolitan Stock Exchange.

The rupee closed on Monday with a marginal gain at 73.83 to the dollar.