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Indian gold price has outpaced overseas gold price, why?

By Monika Nihalani
|

Indian gold price has outpaced overseas gold price, why?
Indian gold prices generally imitate overseas gold prices. In India, the gold futures are trading above Rs 29,000 per 10 grams, while US gold still looks steady at US$ 1,768 a troy ounce.

Last it crossed Rs 29,000-mark in August when US gold futures were trading above US$ 1,900 an ounce. This shows that Indian gold prices have outpaced overseas gold prices.

 

What's the reason behind a deviation?

 

As we all know gold is generally priced in US dollar, so if the greenback moves ahead of all major currencies, it turns expensive for rest of the countries to buy gold.

Recently, US dollar has spiked against the major currencies of the world due to ongoing debt crisis in euro zone.

In India, it has touched a 32-month high and reached at the level of 51, which implies now you need Rs 51 to buy a dollar or a dollar-priced unit.

But the most interesting part is that rupee-vs-dollar-mark has touched a peak when Indian consumers buy lot of gold i.e. in the months of October-November due to festive and wedding season.

According to the World Gold Council, Indian gold demand for jewellery, coins and bars has registered a whopping 38% growth in second quarter of 2011 as compared to same quarter previous year. This increase in growth has happened despite the strong rise in gold prices.

This festive and wedding season has boosted prices to the hilt due to rising demand and continuous fall in rupee against a US dollar.

So, even though the overseas gold prices are moving up on a slow pace but Indian gold price can move at the fast pace till Indian Rupee continues with its weakening trend against the US Dollar.

GoodReturns.in

Read more about: gold futures dollar euro zone
Story first published: Tuesday, June 19, 2012, 14:53 [IST]
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