Gold rush fails to hit home run.

Media, 24-12-2010 08:01:01

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Globally gold might be shining bright but the trend is reversing in India with the yellow metal losing some sheen over the last fortnight as the Indian marriage and festive season nears it close.


With the festival and marriage seasons getting over by early January, February futures of gold were trading below the psychological barrier of ` 20,500 per 10 grams, compared to the peak of Rs 20,924 it touched about a couple of weeks back. But gold is climbing in global markets, as investors sought a safe haven from Europe’s debt troubles.


The international spot price of gold hit $1388 per troy ounce ( 31.1034 grams) on Tuesday evening. Gold prices are decided by the demand and supply for the precious metal in the global markets and is denominated in US dollars. Domestic prices suffer from the influence of the local currency.


A firmer rupee has checked rise in prices of this precious metal, analysts said. The rupee ended at Rs 45.225/235 per dollar on Tuesday, 0.5 per cent higher than Monday’s close of Rs 45.47/ 48.


"Huge dollar inflows are prompted by large external commercial borrowings (ECBs) and qualified institutional placements (QIPs) done by Indian companies," said a senior treasury official in a bank.


Responding to a query, Anand James, chief analyst of Geojit Comtrade said, "Gold has seen a small slide, not a steep fall today. Strong market and stronger rupee have also put pressure on the yellow metal."


However, in the international market it has seen a $3 per ounce rise owing to fears of rating downgrades in Europe and worries that some Euro zone countries and banks could face more borrowing strains.


Gold’s safe haven appeal comes into play if there is economic or geopolitical (like skirmishes between South and North Koreas) uncertainties.


Credit ratings of some Spanish banks were already cut, while speculation is abuzz that banks in France and Belgium also may face such cuts. Gold is the second largest import commodity in India, after oil. India is also the top consumer of the precious metal in the world.

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