Rupee decline pushes gold to a new high at Rs 34,600

MUMBAI-INDIA (Aug 29)   A plunging rupee pushed gold prices to an all-time high level on Wednesday, after a gap of nine months. The free falling rupee also is staring at the government, which has been trying to nail gold imports in the past 18 months for the weakness in the currency.

Gold in the Delhi bullion market touched an intra-day high of Rs 33,900 per 10 gm and settled a little lower at Rs 33,300. The yellow metal in the domestic spot market had made a fresh high last time on November 27, 2012.

In the Multi Commodity Exchange too the active contract made a high of Rs 34,620 and cooled down during the session to Rs 33,800. From Tuesday’s high of Rs 32,824, gold has climbed around Rs 800 to a fresh high on Wednesday and in the spot market, gold gained over Rs 1,300 per 10 gm.

“In the international market too gold made gains, opening at $1415 per ounce and moving up to a high of $1432. The political tension in West Asia and the speculation of a possible military action by the US in Syria has heightened the safe haven buying in gold. In the domestic front, the rupee has been pushing prices of key commodities, including gold, crude oil and copper to fresh highs,” said Tapan Trivedi, senior analyst, Karvy Comtrade.

While rupee has been cushioning the gold prices in the domestic market during the recent lows, the currency has remained quite indifferent to the government measures to co-relate gold imports with its weakness.

“There has been no impact of the government measures to curb gold imports on the rupee. The internal economic issues like current account deficit or policy matters had already battered the rupee and the global political tensions too has upped the pressure on the currency,” he said.

In the past 18 months, when gold import duties were hiked from one per cent to 10 per cent, the rupee has depreciated almost 30 per cent. The import duty hikes did not impact the gold consumption till May. However, the recent restrictions on the quantum of imports considerably brought down the volumes since June.

As per trade sources, in June the imports stood at 31 tonnes and July it was lesser than 40 tonnes. “After July 22, 2013 not even one gram of gold has been imported into the country. The prices are high due to weaker rupee, the premium is high and the customs department and the nominated agencies and banks are confused about the new regulations,” said Haresh Soni, chairman, All India Gem and Jewellery Trade Federation.

Despite the low imports, in June and July the rupee lost over seven per cent and after July 22 it depreciated 15.5 per cent.