Gold Price Information - India

Mumbai, Jan 2


In 2010, all precious metals performed exceptionally well in terms of price appreciation, and with the exception of platinum, all others have actually surpassed the 2008 peak. Undoubtedly, silver and palladium have been outstanding performers with the former hitting 30-year highs.
A remarkable feature of 2010 was that ETF holdings of precious metals rose significantly. Gold ETF holdings were up about 300 tonnes which is well short of the 617 tonnes of ETF buying in 2009. Silver inflows were heavy too, especially in the second half. Platinum and palladium inflows and holding also expanded.


Base metals ended the year strongly. Over the week, lead and zinc showed the largest gains of 6 per cent and 7 per cent respectively. LME copper stocks ended the year at 377,550 tonnes, a fourth below end-2009 levels.


Gold: Interestingly, gold has continued to perform incredibly well reaching newer all-time highs during the year in terms of a number of currencies including the Euro, British pound, the Indian rupee and of course the USD. In London on Friday, the last day of 2010, gold PM Fix was at $1,410.25 an ounce, up 0.3 per cent from previous day's $1,405.50/oz. However, silver edged lower by 0.2 per cent to AM Fix of $30.63/oz on Friday, from the previous day's $30.70/oz.
Platinum had a PM Fix of $1,731/oz and palladium $791/oz, both declining from the previous day.
Gold's Fix above the psychological level of $1,400/oz is seen a positive sign for the New Year. For 2011, gold continues to remain a safe bet. All background conditions are gold positive - lingering growth concern, unresolved European sovereign debt crisis, easy money policy and inflation fears. Central bank purchases and popularity of physically backed ETFs (Exchange Traded Funds) have helped propel the market higher.


Investment demand continues to be strong and the metal's safe haven status is unchallenged. Most experts remain positive on the yellow metal in the near-term. For instance, Barclays Capital has forecast an annual average spot price of $1,445/oz for 2011. From the current level of close to $1,400/oz, prices are expected venture further into unchartered territory quarter after quarter, peaking at a quarterly average all-time high in Q3 at $1,490/oz, it is forecast. At that point in time, it is speculated that the market will start to price in prospects of a potential interest rate increase.
What are the risks to gold prices? Because the metal is overwhelmingly driven by investment demand, a mass exodus of investors will exert tremendous price pressure downward. The second risk is jewellery demand destruction because of exorbitant prices, especially in price-conscious markets such as India.


However, there is reason to believe, given the supportive background, investment demand will continue to remain robust. Potential loss of physical demand may be neutralised by rising incomes and higher purchasing power. Consumers may realign their price expectations as is borne out by India's gold jewellery demand in the first three quarters of 2010 which exceeded demand for the whole of 2009.


“Given that gold jewellery is also bought as a store of value, higher prices also act as a purchase incentive”, Barclays commented.


Despite weak fundamentals, silver outperformed gold in 2010 and reached highs not seen since 1980. Silver is riding on the positive sentiment towards gold. If investor appetite were to decline for any reason, silver will be the first precious metal to head southward and suffer a sharp correction.
For 2011, the annual average spot price forecast made by Barclays Capital is $28.1/oz, with price peaking at the quarterly average of $30.9 in Q3.


In India, currently, gold is traded at around Rs 20,600 for 10 grams and silver at about Rs 46,000 a kg. Domestic market prices closely track global price trends. Given the positive outlook for bullion in 2011, investment even at current levels would bring good returns.


As a note of caution it must be mentioned that the market will continue to remain volatile and there will be price fluctuations. It is absolutely important that investors have a clear exit strategy. It is also highly likely that import tariffs on gold and silver will be raised in the New Year so that the exchequer garners additional revenue.


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Information Source www.thehindubusinessline.comhttp://www.thehindubusinessline.com/2011/01/03/stories/2011010350731200.htm