Overheated India gold market cools down

February 03, 2009

Commodity Online
MUMBAI: The overheated futures and spot gold market in India on Tuesday lost steam as prices dropped in the wake of the fall of gold futures in the global market against gains made by the US dollar.

Gold futures prices at India’s leading Multi Commodity Exchange (MCX) dipped by Rupees 112 to touch Rupees 14150.

In early Asian trade, gold prices extended their downward trend in early Asian trade Tuesday mainly on continued profit taking by investors. Bullion was trading at $901.70 an ounce, down $1.45 from New York's notional close on Monday, when it dropped more than 2% in selling also driven by weak demand from the jewellery sector.

Last week, spot gold prices in India zoomed past the historic Rupees 14,000 levels, prompting analysts to predict that the yellow metal could gatecrash through the Rupees 15,000 level in India, the largest importer and consumer of gold in the world.

But analysts and traders said global economic meltdown, lure for gold exchange traded funds and investment appeal will drive India's gold prices to a record Rupees 16,000 levels per ten grams in three months, a leading Indian jewellery exporter said on Monday.

According to Chairman of Gitanjali Group, Mehul Choksi, gold prices are rising and rising and it would not be a surprise if gold prices zoom to Rupees 16,000 per ten grams by April this year.

"Demand for gold as an investment opportunity is going up day by day among Indian investors. Added to this is the new apeal for gold ETFs in India," Choksi told reporters. He said people are going to invest more money in gold ETFs. "Gold ETFs a safer bet in times of crisis financial markets and currency movements," the jewellery said.

Trading in bullion contracts contributed Rs 2,023,441 crore to the total turnover of India’s commodity exchanges during the first nine months of the current fiscal, according to a data from the commodity market regulator Foward Markets Commission (FMC).

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