Gold prices have surged to the record highs on the Indian commexes hitting Rs.19,198 per ten grams on Multi-Commodity Exchange (MCX) on Tuesday. However, owing to the profit bookings at the upper levels, prices remained weak on Wednesday trading between Rs.18900 to Rs.18999 per ten grams on MCX.
The uptrend in the gold prices was mainly attributed to the global economic crisis primarily focused on European financial upheaval and firming up of US currency, Dollar against the Rupee. The price of the bullion metal had hit Rs.19000 for the first time in the history of India's gold markets.
However, India, despite being the largest consumer of gold in the world remained almost silent on buying front at the boiling prices of yellow metal. Speaking to Commodity Online, Suresh Hundia, President, Bombay Bullion Association (BBA) said, There is no demand either from jewellery side or from the investors' side at these high levels of prices. Most of the investors have come out to cash on the fiery prices and made some profit booking.
According to the market analysts, the upbeat mood in gold prices was mainly driven by the global factors; hence there are least chances for a fall in local demand to affect prices in the short term. I don't see any impact on gold prices even if the local demand has come to a standstill. It is true India is one of the largest consumers of gold but the factors affecting prices are not governed by local demand. Rather they are more global like turbulences in European Union and Dollar's appreciation against Indian Rupee, said Hundia adding that there doesn't seem to be a major break in the price escalation and the prices may continue to go upwards further for some time.
However, marketers anticipate a correction in the prices before the Indian Diwali festival that will be celebrated around November. The prices are so high now that there is a need for a correction and we will see one happening in near future. Gold prices may come down to Rs.16,600 per ounce by Diwali, Hundia told CommodityOnline on a telephonic talk.
The financial crisis impacting smaller European countries such as Hungary, Spain and Portugal has fuelled the prices globally. In the international markets the gold prices have hit USD 1252 per ounce on Tuesday. However, the prices remained under pressure on profit booking. On Wednesday, June 09, 2010 gold prices hovered at around USD 1236 per ounce on New York Mercantile Exchange (NYMEX).
On the other hand, stronger dollar has made gold costlier for Indian consumers. In India, rupee remained in a jittery trade, where partially convertible rupee was at Rs.47.07 per dollar, weaker than its Tuesday's close of Rs.46.95 a dollar. The Indian currency has moved in a band of Rs.46.90 to Rs.47.16 so far on Wednesday.