Speculation in gold soars again

Global uncertainty, lull in other markets driving global investors to precious metals.

According to commodity brokers, traders are targeting gold on the back of the debt crises in the US and Europe and anticipation that retail gold demand would gain pace in August, when the festival and wedding seasons start in India, traditionally the world’s biggest consumer of bullion.

In July, the domestic market recorded the highest ever average daily turnover in gold futures contracts. The combined turnover on the NCDEX and MCX in all gold futures contracts was nearly Rs 10,000 daily. On MCX, gold futures rallied to its ninth record high this year.

The price of gold in the international market is also on an upward momentum. On the Nymex, spot gold was last quoted at $1,670 an ounce, up 0.6 per cent, having hit a record $1,672.65 earlier during the day.

Gold prices in sterling and euro also reached historical highs on Tuesday.

The most-active gold for October delivery on the MCX was trading 1.7 per cent higher at Rs 24,211 per 10g, after hitting a record of Rs 24,233. The contract had struck a peak in the previous session. Gold prices in the Mumbai spot market also went up by Rs 580 per 10g on Wednesday and closed at Rs 23,955 per 10g.

According to brokers, speculation in gold was also high as other highly traded asset classes such as equity were out of favour. Gold is often a favourite hedge against inflation during financial crises.

“Investors are buying gold as the only asset class, which has ensured enormous returns in the last few years. The lull in other markets, including equity, currency and real estate, is driving global investors to precious metals. The global gold market is driven primarily by developing countries like India and China, where consumers’ aspiration towards the yellow metal continues irrespective of price rise,” said Naveen Mathur, associate director (commodities and currencies), Angel Broking.

Earlier this year, silver was the favourite of punters. Its price reached a lifetime high of Rs 74,000 a kg on April 28 from around Rs 37,000 in January. The trading volumes, however, crashed badly in June, as traders were sitting on huge losses after a nearly 50 crash in its prices.