Rising tensions in Iraq and weaker-than-expected employment data in the U.S. last week saw gold gaining on the international market as well as the domestic market.

Following the global cues, investors and stockists resorted to gold buying for its ‘safe haven’ status and standard gold in Mumbai moved up from Rs. 26,660 per 10 gram on Monday last to close Saturday at Rs. 27,325 a 2.5 per cent gain.

Bullion traders and market watchers who were very confident of gold’s declining trend, are now more sanguine. The reaction in prices could be more gradual, they felt.

Speaking to this correspondent, Chirag Mehta, Fund Manager – Commodities, Quantum Asset Management Company said, “The unrest in Iraq and concerns about crude price provoked the gold price rise, similar to the Russia-Ukraine tensions some weeks ago. Besides, there are no major signs of sustainable growth in the U.S. economy and there seem to be short term challenges.”

The rupee weakened against the dollar last week after having strengthened over the last six months, making gold imports dearer.

Prithviraj Kothari, Vice-president, India Bullion & Jewellers Association (IBJA) and Managing Director, Riddhi Siddhi Bullion, a leading gold trading outfit, felt the new BJP government has made all the right noises about reducing the high 10 per cent import duty on gold and fully roll-back of the 80:20 scheme which had constricted gold supply.

He felt that gold price was at an important juncture. “It will certainly depend on what happens to import duty and the rupee versus dollar parity as also on the progress of the monsoon. The next two months are anyway slack season so physical off-take is anyway limited.”

Mr. Kothari felt that depending on the above factors, gold could settle at Rs. 23,000-24,000 per 10 gram levels by Diwali.

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