Bullion continues to surge ahead

Overseas metals at multi-year highs seen as trigger.

Prices of precious metals in the domestic market surged to new all-time highs, as crude oil nudged to $71.29 a barrel and overseas metals to multi-year new highs for the third consecutive day.

Spot price of gold touched a high of Rs 9,200 per 10 gm, from the previous close of Rs 9,100 as overseas spot gold rose by $11 to a new 25-year high of $630 a troy ounce.

As the overseas price of silver touched a new 24-year high of $14. 2 a troy ounce, the domestic price of the white metal was at Rs 21,800 a kg against yesterday's Rs 20,500.

Spot price of crude oil on Wednesday touched an all-time high of $71.29 a barrel vis-a-vis yesterday's $70.43, past the earlier high of $70.85 set on August 30, 2005.

"Correction is imminent in gold now, as at current levels there is a good opportunity for profit taking. The upward trend in crude oil is expected to continue and it may touch $80 a barrel in some time. In case of silver, however, it is difficult to predict," said T Gnansekar, an independent analyst.

Correction of about $10 a troy ounce in gold is expected with US CPI data expected to be on the higher end, said V Sivaramakrishnan, a Dubai-based analyst. Post-profit booking, gold prices are likely to rise again to the $640 a troy ounce level.

The current spiralling of prices of crude oil and precious metals is attributed to the underlying tight demand-supply scenario for crude oil and other commodities, the Iran-US tensions, US inflation woes and the market awaiting launches of new investment vehicles in crude oil and silver.

"Rising Asian equity markets are signalling towards excellent growth prospects in Asia, the region which holds about 60-70 per cent of the global foreign exchange reserves on Wednesday. The region is also attracting huge foreign investments, thereby hinting at a tight-demand supply scenario for various commodities," said head of a Mumbai-based brokerage.

Further, market players said with China's first quarter growth in the calendar year turning out to be better than expected, its consumption of various commodities is expected to be higher than estimates. This may propel the bull run further.

Because of skyrocketing prices, domestic demand for fresh sales of gold and silver has been hit drastically. Banks and dealers seem to be sceptical about demand in the immediate future.

With the marriage season on, hoarded gold is out and jewellers are busy recycling it. Gold prices are seen firm on hopes of good demand in the ongoing wedding season, which started on April 12, and because of Akshayatritiya, an auspicious occasion to buy the precious metal on April 30.

Funds and other institutional players are shifting their investments to precious metals, especially gold as the yellow metal is considered to be a good hedge against inflation.

In a bid to tackle the rising inflation, the market expects the US Federal Reserve to hike interest rates by another 25 basis points, to 5 per cent in its upcoming meeting on May 10. The Fed has lifted rates 15 straight times to 4.75 per cent.