Mumbai: Gold recovered more than 1.5% on Monday, nearing its highest level in nearly a week, following a rise overseas where investors sought safety amid worries of worsening debt crisis in euro zone, and a weaker rupee back home.
Global gold gained 0.8%, extending a 1.2% rise in the previous session, as worries about a worsening debt crisis in the euro zone and the bloc’s future drove investors to seek safety in bullion.
The most-active gold for October delivery on the Multi Commodity Exchange (MCX) was trading 1.71% higher at Rs 28,204 per 10 grams, after hitting an intra-day high of Rs 28,235, nearing a level seen on 14 September.
Investors will focus on a policy meeting of the US Federal Reserve on Tuesday and Wednesday, where the Fed could take steps to increase downward pressure on longer term interest rates to help spur a recovery of the world’s largest economy.
The rupee fell more than 1% as mounting fears Europe’s sovereign debt troubles could trigger a full blown banking crisis curtailed risk appetite and sent shares and the euro lower.
The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.
Physical buying retreated after a brief pick-up last week as an inauspicious period, when Indians pay homage to their ancestors, is underway.
“(The) rupee is weaker it is one of the important reason for the spike in local prices and still it is non-auspicious days of Shradh. So demand for the time being is not there,” said Sanjeev Garg, director with Delhi-based LMJ International, a commodities trading house.
Festival and wedding demand in India, the world’s biggest bullion consumer, will gain pace and peak in October and November, before tapering off in December.
Demand will always be here in India, and due to the uncertainty in equity markets, more and more people should diversify into gold, Garg said.
Gold seen extending losses on profit sales
Gold futures are likely to extend losses this week on continued profit-taking after the yellow metal gained close to 20% since August, with traders eyeing the Federal Reserve’s meeting slated on Tuesday and Wednesday for direction.
At 4:39pm, the most-traded gold for October delivery on the Multi Commodity Exchange (MCX) was 1.41% higher at Rs 28,120 per 10 grams, after losing 1.4% in the previous week.
The US Federal Reserve is holding a policy meeting on Tuesday and Wednesday, when the Fed could take steps to increase downward pressure on longer term interest rates to help spur a recovery of the world’s largest economy.
“We are expecting volatile movement this week,” said Subhrasom De, an analyst with Karvy Comtrade. Selling could be done at 28,300/28,500 rupees, for a target of Rs 27,500/27,400.
Silver prices are likely to edge lower following gold, analysts said.
Silver prices on the MCX was up 0.29% higher at Rs 64,594 per kg.
Selling could be done at Rs 62,800 in silver, for a target of 61,100/60,550, with a stop loss at Rs 63,500 said De, adding 65,800 could act as a tough resistance.