Wednesday, November 4, 2009

Gold Futures Hit New High On Reserve Bank of India Buy

. Wednesday, November 4, 2009

By stockOzone team

Indian gold futures soared to a record on Tuesday after the country bought 200 tonne of gold from the International Monetary Fund (IMF), but high prices dampened physical demand in the world's largest consumer of the metal.

The purchase, bigger than India's total imports so far this year, may help Indian consumers accept a higher price for gold, analysts said. Traders said volatility-averse Indians would wait for prices to fall in a stable range, before resuming their purchases for weddings.

Consumers are not in a hurry to buy. They will wait for Rs 15,800-16,200 ($336-$345) per 10 grams, said Pinakin Vyas, assistant vice president-treasury at IndusInd Bank in Mumbai.

Earlier, traders and dealers had said the level Indians were watching to buy was around Rs 15,500. The IMF said on Monday it sold 200 tonne of gold to the Reserve Bank of India for $6.7 billion, quietly executing half of a long-planned bullion sale that had threatened to slow gold's rally.

The December contract on the Multi Commodity Exchange of India Ltd rose to Rs 16,248 ($345.7) per 10 grams, erasing the previous high of Rs 16,173 on Monday.

At around 1120 GMT gold futures traded at Rs 16,223.

There won't be any difference at all in the market. People will still wait for a correction, said Prithviraj Kothari, director of Riddisiddhi Bullions Ltd, a large wholesaler in Mumbai.

Kothari said prices in the local market were discounted by $4 to $5 over the international market owing to the lack of demand and the prospect of profit taking.

A prominent buyer of old gold in Mumbai's gold hub, Kapilkumar of Chokshi Arvind Jewellers, said few profit takers had showed up in the market looking to liquidate their old gold. People who are in need of money are selling. The wise investors who track the market are waiting for $1,100, he said.

Kishore Narne, vice president, commodities, at Anand Rathi Commodities in Mumbai, said the IMF sale would keep the sentiment bullish in the near future and could push gold to test its lifetime high of $1,070.4 struck on October 14.

Gold traded slightly lower in the international spot market at $1,057 an ounce. The metal is up 20% this year, and will likely keep its record of not having a down year since 2000.

India, the world's biggest gold market, has imported less gold this year as prices repeatedly made new highs. Imports by traders between January and October 22 were 157.9 tonne, down from 383 tonne bought in the same period a year ago, data from the Bombay Bullion Association showed.

Disclosure: Author does not own any of the stocks discussed here.

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