Markets

A Golden Show for Gold investments in H1 2010-11

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The first half of the current fiscal, i.e. April to September, 2010 has turned out to be one of the best times not only for the gold investors but also for the retailers who sold and exported record number of jewelleries during this period.

The gold prices have surged as high as 16% since April till September, and made the historical high of around USD 1320 per ounce in the last days of the first half of the fiscal 2010-11.

However, it is seen that the rise in gold prices was not so sharp in the early part of the six months.

The investors seemed to be jittery on investing in gold as the prices ruled at historical high of over USD 1200 per ounce. The month of June witnessed some increased buoyancy in the international markets on the worries of sluggish economic recovery on the back of concerns about Euro Zone economic woes.

But the uptrend was contained as the buying activity stalled due to peaking up prices. The end of July and beginning of August witnessed prices coming down till USD 1155-60 per ounce.

However, jewellery demand and the beginning of festive season from August onwards pushed up the demand for yellow metal. The prices continued uptrend without any major downfall and settled at above USD 1320 per ounce at the end-September.

Meanwhile the gold prices have reported a sharp rise from August onwards, since when the prices have surged over 14% so far.

While buoyancy in the bullion metal is seen to continue further, the demand for the metal is believed to rise further as the Indian festival Diwali; an auspicious period for purchasing gold will fuel buying sentiment in the domestic markets.

A top official from World Gold Council had recently quoted that 'India's influence over the gold bullion market is well established, as the jewellery accounts for nearly 70% of all demand for gold and that India buys 25% of global jewellery output from the world.

At this point, the gold stocks have posted not-so attractive gains on the bourses that investors would be eyeing at. Key gold stocks on the Bombay Stock Exchange ( BSE ) remained silent over the past six months.

Renaissance Jewellery Ltd (BOM:532932) fell above 2.5% since April till September. India's leading gold jewellery exporter, Rajesh Exports (BOM:531500) fell over 14.7% during the said period.

However another key jewellery player, Gitanjali Gems Ltd (BOM:532715) was an exception to the falling trend in gold stocks. The company stocks made killing in the first half of the fiscal by gaining over 101% during the period.

Gold hovered at a higher end in the domestic markets as the buying from retail as well as fund houses has remained upbeat. The festivities in the Indian sub-continents is believed to fuel demand further and scale up the prices to make fresh peak levels.

A Chinese proverb aptly suits the current fiery rally in the bullion metal. \"Pure gold does not fear furnace\". In recent trades, the gold prices have touched a record high of USD 1,350 per ounce, up 22.9% so far this year.

This is leading the metal for the longest bull market for gold since 1920. This decade will see the gold prices surge at a CAGR of 17.84%, since the beginning.

Imports of the yellow metal also has been on upside. The month of September saw gold imports surging 30% to 34.8 tonnes against the previous month.

In August, the country imported gold worth 26.8 tonnes. However, gold imports in September were 4.9 tonne less that that witnessed in the corresponding month last year.

But looking at the buoyancy in the markets, the imports are sure to rise further in October. The domestic prices have touched an all-time high of Rs.19,900 per 10 grams in the domestic markets last week.

So, considering the gold movement in the first half of the current fiscal, the prices and demand will scale up further, making gold once again most favoured investment instruments among all.

Overseas cues including US jobs and economic data joined with indications from the European Union will hold the key for the future direction of the yellow metal. If the sluggishness continues to persist with uneven economic recovery globally, the prices are sure to hit Rs.20,000 per 10 grams in the Indian markets in near term.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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