Ahead of Dhanteras, gold prices soared to a six-year high level on Thursday, tracking global rates. Bullion traders said investors are diverting funds from falling equity market to the precious metal. Hectic buying by jewellers to meet the seasonal demand also pushed up the prices.

In New Delhi, spot gold gained Rs 125 to trade at Rs 32,625 per 10 gm, a level that was last seen in November 2012. Prices rose for the third straight session on Thursday and the metal has gained a handsome Rs 405 since October 23. In the Multi Commodity Exchange, however, prices were trading around Rs 32,280 levels.

Traders said the sentiment got a boost on firming trend in overseas where gold traded at over three-month high as the dollar eased and equities slumped. Analysts said gold prices can move towards $1,250-$1,255 level in the short-term. In the domestic spot market, this would take gold prices closer to Rs 33,000 per 10 gm if rupee remains stable at the current level. The demand in the spot market and premiums too will determine the level. During Dhanteras and Diwali, premiums are expected to be high due to festive season demand.

“There is speculation in the market that the gold price rise will scare away gold jewellery buyers this festive season. The jewellers always eye the last quarter of the calendar year to maximise their sales driven by festive and wedding seasons. However, the price rise of gold will impact the volume-based purchase to some extent,” said Ahammed MP, chairman, Malabar Gold and Diamonds.
Though prices will remain elevated during the coming weeks, for gold to get into a full-fledged bull-run mode US Federal Reserve must halt its interest rate hike plans, said analysts.  Though US president Donald Trump has been criticising rate hikes, the Federal Reserve has not let out any clues as to discontinuing rate hikes.

According to Amar Pandit a certified financial planner, “The prices of gold rose to more than 32,600 (which is a six year high) because of buying for festive season. This is seasonal in nature which has supported the uptrend in gold recently. Also, uncertainty in the equity market and weak rupee diverted a portion of funds from equity to gold. We believe this is temporary (specially festive season demand) and once the overall outlook (micro as well as macro) improves and we see much more clarity, investors will move savings towards financial assets. From an overall asset allocation point of view, one can look to have an exposure of 5 per cent of the portfolio to gold.”

Cautioning retail investors, Pankaaj Maalde, a certified financial planner, said, “One should not invest more than 5-10 per cent of their total investments in gold. People can consider the gold bond scheme that offers an interest rate of 2.5 per cent a year. But the GBS has a 7-year lock-in and if an investor wants to make quick gains and exit, he can look at exchange traded funds (ETF).”

In the global market, prices broke narrow range twice this week to touch $1,239 per ounce, a three-month high level.  “It was moving in a short range of $1,220 and $1,230 when on Monday it broke that level and moved closer to $1,240. On Thursday it once gain touched $1,239,” said Himanshu Gupta, vice-president and head of commodities and currencies research, Globe Capital.

Global gold prices have moved up 6 per cent since mid-August. Reports coming in from Italy on fiscal deficit, uncertainties around Brexit and the comments made by Donald Trump on the murder of Saudi journalist Jamal Khashoggi added to the worries in the market, forcing investors to flock to safe havens.

Input from Falaknaaz Syed