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. – Reuters
