RSBL Gold Silver Bars/Coins

Tuesday, 19 June 2012


Last fortnight saw great volatility in gold, with gold reaching its life time high at Rs. 30,400 per 10gm in the physical market, then dropping again by almost 1000 rupees per 10 gm and then nearing back to its life time high.

Indian gold prices in the bullion market reached of Rs. 30,285 per 10 grams on Wednesday. On Wednesday, Indian gold prices rose by Rs. 270 to Rs. 30,285 per 10 grams and neared its previous record of Rs. 30,400 set on June 6. This is mainly due to Rupee weakness against dollar amid strong cues from the world markets. Gold rose on Wednesday morning trading, reflecting a slight softening of the US dollar and continued fears over the stability of the European periphery.

A rally on Tuesday afternoon pushed the metal through $1,600 to a high of $1,617.85. It was last near this level at $1,613.25/1,613.75 per ounce, up $2.53 on Tuesday's close.

Gold has outperformed other precious metals, leading to renewed speculation that it had regained its status as a safe-haven asset - its traditional role in times of economic uncertainty.

With China's economy slowing in addition to the euro zone's debt problems, the USA payrolls data added to worries of a global economic slowdown. The May employment report was quite weak, and it does raise the odds of Federal Reserve to launch another round of monetary stimulus to support the U.S. economy, known as "Operation Twist," at the its next policy meeting on June 19-20. The Twist program extends the maturity of the central bank's Treasuries holdings in a bid to bring down long-term borrowing costs like mortgage rates. The program is set to expire at the end of June.

On Domestic front, India is reeling under the pressure of depreciating currency i.e. Indian Rupee. A currency’s external value declines when their import weighs more than its general exports because it expands the trade gap and increases pressure on the economy as a whole. In the case of India, nearly 70 percent of its oil demand is met by imports. As a result, the plummeting currency will eventually increase import bill and will lead to a rise in oil prices and contribute to inflation. This in turn will lead to a rise in precious metals.

The Greek elections that were held on Sunday were expected to bring in more volatility, but then again the market is awaiting the FOMC meeting that concludes on 20th June.

Gold has an opportunity to re-establish its safe-haven status, particularly as concerns over sovereign debt, flat currency, counter-party risk and the desire to hold a hard asset have supported gold in the past.

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