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Stronger Indian Rupee May Boost Demand for Gold

Release Date: 
Monday, October 22, 2012

The price of gold moved higher after the Spanish prime minister’s austerity plan received an endorsement by voters in a regional referendum.  Gold was $5.80 higher at 7:36 a.m. Pacific Time on the New York Spot Market, trading at $1,727.30 per ounce.  Spot silver was $.25 higher, trading at $32.42 per ounce.  (Click here for the most current spot prices.)

With the recent rise of the rupee, gold has become more affordable during the primary festival season in India.  “The appreciation in the rupee has caused the gold price to correct from the record levels and this correction is seen as an opportunity by many to get into gold,” said Chirag Mehta, a fund manager at Quantum Asset Management Co. “With the festival season and marriage season starting now, demand will gain further momentum.”

Demand has picked up in the last 10 to 15 days and buying may be better this festival season than a year earlier, said Bachhraj Bamalwa, chairman of the All India Gems & Jewelry Trade Federation. “In the last three to four months, there was practically no demand for gold because of the high prices. There is a lot of latent demand, and we expect this festive season to be better.”

Gold imports by India are set to climb for the first time in six quarters, Mr. Bamalwa said.

“India should be a better buyer over the next two weeks from a seasonal perspective, but this remains highly contingent on the behavior of the rupee gold price,” UBS analyst Edel Tully said in a report.

(Sources: “PRECIOUS-Gold rebounds as stocks recover, dollar retreats,” Reuters, October 22, 2012; Gold Imports by India Seen Climbing First Time in Six Quarters,” Bloomberg, October 19, 2012; “PRECIOUS-Gold tracks equities lower, heads for 2nd weekly fall,” Reuters, October 19, 2012;
 “PRECIOUS METALS: Gold Falls a Tad in Asia; Weaker Equities Weigh,” Wall Street Journal, October 19, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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