Soon, gold is all set to cross the Rs 19,000 per 10 gm mark in India with global trends showing a huge rise in the coming days following the financial uncertainty continuing in global economy.
But, lack of demand in India is one thing which is worrying the market as gold imports to the country slumped hugely in the previous month.
The most-active August gold on the Multi Commodity Exchange (MCX) was trading 0.40 per cent higher at Rs 18,889 per 10 gm on Monday.
India, the world's top gold buyer saw a sharp drop in June imports, signaling recent record high prices are dissuading fundamental demand even as the world's largest exchange-traded fund reports record holdings.
Spot gold rose $7.80 to $1,261.35 an ounce in London on Monday, having hit an all-time high of $1,264.90 an ounce last Monday.
Adding to the bullish backdrop for gold were comments from US intelligence officials that Iran has enough fissile material for two atomic bombs.
But flagging equities and the broad decline in the euro reinvigorated the safe-haven sweep into both the US currency and gold, prompting the two to move in tandem.
Meanwhile, a Wall Street Journal report said India's gold imports will fall 40% in 2010 from 343 tonnes last year as prices climb to new highs.
There are only sellers in the market at these prices and most jewellers are buying back only old jewelry as they are quoting at a 1%-2% discount to imported gold.
Imports in June fell 75% from 29.9 tonnes a year earlier and may halve next month from 28.4 tonnes last July.
But the bull run in gold may lose steam anytime because of a cyclical correction and prices could topple to 16,500 rupees levels before recovering.
Physical holdings in SPDR Gold Shares, the world's largest gold ETF, rose to an all-time high of 1,316.18 tonnes on Friday because of safe-haven buying as a fallout of the European debt crisis.
High prices are tempting Indian consumers to sell their old gold jewelry, and that supply is reducing the need for imports.
Poor jewelry demand has caused half the jewelry manufacturers to shut shop in Mumbai, while the remaining have slashed their work shifts.
High prices have also dented the country's silver imports, but demand for the white metal is likely to recover later this year because likely normal monsoon rains will lift rural demand.
India's rural sector accounts for about 60% of silver demand and farmers' incomes rise whenever there are normal monsoon rains as most of the country's farmland is rain-fed.
But silver imports would still be sharply lower than the 3,000-4,000 tonnes purchased couple of years ago, as prices have jumped to current record levels of Rs 30,000 per kg.