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BW Businessworld

Firm Rupee Aids Gold Buying Ahead Of Festivals

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A strong rupee gave India's gold buyers a reprieve, pushing local gold prices to a five-week low and luring gold importers to stock up bullion for upcoming festivals. India's festival and wedding season will start in late October and will peak at next month's Diwali and Dhanteras, traditionally marked by a frenzy of purchases of gold as gifts.

The most-active gold for December delivery on the Multi Commodity Exchange (MCX) struck an intra-day low of Rs 30,969 per 10 grams, the lowest since 31 August. "There is heavy demand, because the rates have come down on rupee appreciation," said Ganesh Agarwal, director of Shiv Sahai and Sons India Limited, a Chennai-based wholesaler, adding that investors were also among recent gold buyers.

The rupee rose to its highest against the dollar in more than five months, keeping rupee prices of the precious metal subdued, as dollar-priced gold hovered near an 11-month high above $1,791 hit earlier this week.

Elsewhere in Asia, selling from Indonesia eased after prices slipped from a peak hit earlier this week that triggered a wave of scrap selling.

"The selling is slowly drying up as we are seeing smaller quantity now," said a Singapore-based dealer, adding that discount on scrap was as deep as $3 an ounce. A second Singapore-based dealer said the premium on gold bars was in the range of 20 to 40 cents an ounce above London prices. In Japan, a weakening yen helped underpin gold selling, a Tokyo-based trader said.

"Selling is not aggressive, but if gold in yen terms rise above 4,500 yen a gram, we may see more selling in the domestic market," he said, adding that the discount was still about 75 cents.

Markets in China are closed for a public holiday. In Hong Kong, a main conduit for gold flow into China, premiums were steady at around 50 cents, dealers said.

Week Ahead
Investors will closely watch for cues from central banks on their plans to shore up the battered global economy, which will further boost prices of gold, seen as a good hedge against inflation and currency risks.

(Reuters)
 


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economy india china gold dollar festivals rupee diwali