Gold may move upwards again this week on strong physical buying as the absence of other profitable investment avenues has increased the metal’s appeal as a safe instrument.
If the World Gold Council (WGC) data is any indication, investors are holding on to the yellow metal, which has offered 13-15 per cent year-on-year return for several years.
Globally, the demand for gold has recorded 18 per cent growth in the third quarter of the calendar year totaling 1,133.4 tonnes, a rise of 170.1 tonnes from the same period last year.
Total imports in India, the world’s largest consumer, shot up 31 per cent to 250 tonnes in the third quarter of this year compared with 190 tonnes in the year-ago period.
The global body attributed the spurt in demand to the fall in price, which coincided with sharply escalated levels of economic and financial uncertainty.
Doubting the one-sided movement of prices, Jayant Manglik, head-commodities of Religare Commodities, said, “When the demand for the yellow metal in all forms was soaring recently, prices declined to $710 due to high inflation. Therefore, inflation is going to play a major role in the future.”
The world body is, however, hopeful of higher demand for jewellery, bars, coins and exchange traded funds (ETFs) in the fourth quarter. As uncertainty continues to haunt the global economy, gold’s appeal remains. However, this will lead to increased speculation in the gold market.
While the commodity price and margin call related selling appears to have abated, it is soon to call an end to market volatility.
The downward effect on the total supply caused by dehedging is abating and this is set to continue, WGC said.
However, net central bank sales should remain at subdued levels and the constraints on mine supply are unlikely to ease. The credit crisis will continue to affect both exploration activity and potentially mine expansion, particularly among the smaller players.
Meanwhile, gold rallied above $800 an ounce on Friday, gaining 8 per cent over the week, as global economic uncertainties triggered a bout of heavy buying. Investors’ confidence was shaken after Citigroup’s, the second largest US bank by assets, merger rumour shadowed the financial market on Friday.
On Friday, US gold futures for December delivery settled up 5.8 per cent, or $43.10, at $791.80 an ounce on the COMEX division of the New York Mercantile Exchange.
The metal is still 25 per cent away from the lifetime high of $1,030.80 struck in March. In October, however, the yellow metal hit a two-month high of $931, but soon declined sharply on funds’ rush for profit booking to offset losses in equities and other commodities markets.
Standard gold in Mumbai hit the benchmark of Rs 13,000 per 10 gram on Saturday before settling Rs 5 lower from this level.
The metal recorded a gain of 5.4 per cent from previous day and 8.65 per cent on the week. Pure gold also followed suit and ended the week with similar gain at Rs 13060 per 10 gram.
