Gold prices have started rising again, killing all fears of a bearish trend in the yellow metal. The rise in silver prices has, in fact, been even more meteoric in recent days.
In just three weeks from mid-August, gold has risen 6.6 per cent and silver 18 per cent.
The precious metals are rallying due to speculative front-running on expectations of liquidity easing by several leading central banks globally, including Europe's ECB, the US Federal Reserve and the People's Bank of China.
The Indian market for precious metals is mirrors global market in prices. India, despite being the largest consumer, is not in a position to set prices.
Gold prices in the Indian market (Mumbai) are up six per cent and silver 15.4 per cent in the said period.
Today, gold crossed the $1,700 level in the London market and was trading around $1,710 an ounce while silver was trading around $33 an ounce.
These levels have been seen after six months in the international market.
In the Mumbai market today, gold was traded above Rs 32,000 per 10 g while silver was above Rs 61,000 per kg.
Indian precious metal prices have remained high as the rupee has been depreciating for the past year. Prices closed at Rs 31,700 per gram for gold and Rs 62,575 per kg for silver.
"Several buyers/investors who were waiting for a price correction when gold was hovering around Rs 29,000-30,000 are now daily seeing new highs and prices are above Rs 32,000, leaving them feeling left out in the current rally," said Chirag Mehta, fund manager, commodities, at Quantum Asset Management.
Just a couple of months ago, several investors in gold exchange-traded funds or holding physical gold were booking profits as they felt prices had risen substantially.
However, "rising prices give confidence to investors that their earlier investments are performing and they look for putting more money in rising assets.
"In any case, Indian investors have not seen losses in gold in the past 11 years," said Rajiv Popley, director, Popley Group, having a presence in India and Dubai.
"They will have to get used to a Rs 30,000-plus gold price now," he said.
The government regards gold as an unproductive investment. If investors are turning back to the "unproductive" asset, imports could rise again.
Of late, imports have been falling and according to World Gold Council data India's imports have shrunk more than 35 per cent in the first half of 2012.
However, according to Prithviraj Kothari, president of the Bombay Bullion Association, "While we are waiting for the data to get compiled, imports of gold in August were higher than in July."