Selling halts gold’s move to cross $300 levels

Our Commodities Bureau

Mumbai, Sept 12: The terrorists’ attack on the US and the resultant all-round weakening of the equity markets failed to make gold a more attractive investment avenue than it was before. After the yellow metal touching the recent high of $291 on Tuesday evening (after the attacks), on Wednesday there was all-round selling which almost halted gold’s expected climb to reach the much-awaited $300 per troy oz levels in the international markets.

On Tuesday, gold prices had jumped to three months’ high of $291 levels, from sluggish levels of around $270-2 levels earlier. However, on Wednesday despite the auction of Bank of England being oversubscribed by some 4.3 times its offering of 20 tn, gold prices slid back to stabilise at around $280 levels.

In Mumbai, the yellow metal opened sharply higher by Rs 160 per ten gram at Rs 4,620 as against yesterday’s close of Rs 4460. In Delhi, gold firmed up by Rs 200 to Rs 4,650 per tola (ten grams) in the first one-hour trading on local buying influenced by a rise of $20 in international markets. In Kolkata and Chennai, it opened smartly higher at Rs 4,550 and Rs 4,670 per ten gram respectively.

A Delhi-based bullion merchant said if calculated on dollar conversion, the official price comes to Rs 4,725 per ten gram. "Gold as a metal has its own fundamental properties which do not change overnight," said a bullion trader at a leading foreign bullion bank. "This is one of the rare occasions where, despite weakness in the US dollar, the gold prices are seen sluggish."

One of the important reasons for this situation, the bullion trader said was the strengthening of the euro, which after January 2002 would become one currency of unified Europe. "The euro is emerging as a stronger contender for both the US dollar and gold, and therefore, investors are weighing their options of investment avenues.’’

Said Bombay Bullion Association President Mukul Sonawalla: "Currently, there is no liquidity in the bullion trade and market, which could help firm up the gold prices."

Further, Mr Sonawala said, in tighter liquidity situation traders are keen to book profit which would in turn prevent gold prices from firming up from current levels." Inevitably, therefore, gold was sliding back to trading zone of $285-90. "It seems difficult that gold would cross the $300-mark in the near future, except of course, something drastic and unexpected happens," the foreign bank’s bullion trader said.

Meanwhile, in Hong Kong, prices opened sharply higher today at $282.00-287.00 an oz against the previous close of around $270-271. Similarly, gold shot up to a three-and-a-half month high of USD 285.15 an ounce in Europe within minutes of the explosions in New York and Washington.