High prices have made 2019 one of the best years in the recent past, with gold returning 12.5 per cent so far.
However, because of the high prices, gold was trading at a huge discount to the cost of import as the demand was very thin, reports Rajesh Bhayani.
Gold prices surged sharply in the international and Mumbai spot markets, touching an all-time high again in the domestic market, trading above Rs 35,000 per 10 grammes.
Even silver is now trading above Rs 41,000 per kg in Mumbai's Zaveri Bazar but closed lower.
High prices have made 2019 one of the best years in the recent past with gold returning 12.5 per cent so far.
However, because of the high prices, gold was trading at a huge discount to the cost of import as the demand was very thin and because some traders holding old gold stock were selling it.
Unofficially, imported gold was selling at much lower prices, putting pressure on all jewellers who were not dealing with the grey market.
High price has hit demand sharply in India.
In the Mumbai market on Friday, gold was trading at a discount of $20-25 per ounce or Rs 500-600 per 10 grammes when the market opened.
However, unofficially, gold was on Friday selling at Rs 34,400.
This is Rs 700 per 10 grammes cheaper than official gold and Rs 1,200 lower than the cost of official import.
With the US and Iran dispute getting uglier and the possibility of the US Federal Reserve cutting interest rate during its July-end meeting, the gold and silver markets have remained strong.
In fact, globally, fund managers are now debating whether the cut by US Fed will be 0.25 or half a percentage point.
New York Fed president John Williams said, "In a world where interest rates are lower than they have been historically, central banks must confront any sign of weakness quickly and aggressively, take swift action when faced with adverse conditions, and keep interest rates lower for longer."
He had also said that policy makers cannot wait for a disaster to unfold.
At high prices, "Demand for new jewellery is very thin as customers are not prepared to buy at such a high price.
"In a few month, prices have risen 10 per cent.
"Generally, at high prices, people were selling old gold but now even that has reduced as rising prices are tempting them to hold gold," said Kapil Choksi, partner, Choksi Arvind Jewellers.
Silver price, which had been a laggard for quite some time, has seen a sharp rally in the past few days, bringing down the ratio of gold to silver prices.
It was at 93.3 last week and has fallen sharply to 87.6.
The ratio indicates how cheap silver is compared to gold.
Naveen Mathur, director, commodities and currencies at Anand Rathi Shares and Stock Brokers, said, "We are bullish on gold but because prices have rallied about 2 per cent in the week so far, we do not rule out the possibility of a dip. Comex gold has good support near $1,400; so, a fall to this level is possible.
"On the higher side, the $1,455-$1,480 range constitutes stiff resistance. On the MCX, Rs 35,000 is strong support for the coming sessions with Rs 35,600 being the resistance point. Hence, we recommend going long on dips."
