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Gold on firm trend ahead of festive season

Ramnath Subbu

Weak dollar and dearer oil cause prices to stay high; purchases from Middle East push up market

MUMBAI: Gold prices, which have been holding strong on the back of a weak U.S. dollar and oil prices, are unlikely to deter the Indian buyer for whom the festive season commences this week.

The yellow metal touched a high of Rs 6,770 per 10 gram on Friday following brisk buying by stockists and investors in the run-up to the festive season. Overseas, gold was around recent highs at around $ 473 per ounce. Madhusudhan Daga, bullion analyst and consultant, Goldfield Mineral Services, said there was a continuing bullishness in gold. "Prices will not go down. The U.S. dollar is inversely related to gold prices and it seems it will continue to rule weak as the U.S. economy is unlikely to pick up amidst inflation fears. Even oil prices, which are directly related to gold prices, will continue to rule firm.''

There is a school of thought that the surplus profits being reaped by oil-rich Gulf countries are being directed to buying gold. "That could well be the case because the Middle East countries are averse to investing in the U.S. dollar,'' Sanjeev Agarwal, Managing Director — Indian continent, World Gold Council (WGC), told The Hindu.

On the domestic front, the `shraddh paksha' or inauspicious period ends on October 2 and the marriage season commences 15 days thereafter. "Although demand may be limited, `marriage demand' for gold never stops,'' said Mr. Daga. "I see gold prices moving in the broad range of $440-480 and even scaling $500 an ounce by the end of the year,'' he said.

According to the WGC, Indian gold demand in the first half of the current calendar was up 57 per cent.

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