An artisan makes gold ornament at a workshop in Ahmedabad, India, Tuesday, Aug. 9, 2011.Ajit Solanki/AP
India's benchmark gold futures extended gains by more than two per cent on Friday tailing a rally in the world market, hitting a new peak of 27,887 rupees or $602 per 10 grams, and discouraging physical buyers ahead of a slew of festivals and weddings, dealers said.
The October contract on the Multi Commodity Exchange rose 2.43 per cent to 27,833 rupees at 4 p.m. It has risen over 18 per cent so far in August.
"Demand was negligible. Prices were running too fast and it was difficult for consumers to adjust with them," said a dealer at Parker Agrochem Exports Ltd, a precious metals wholesaler in Ahmedabad in Gujarat.
"Buyers were waiting for correction and they are waiting for correction, but nothing is happening. Price is rallying and buyers are at bay."
International spot gold prices rallied more than two per cent to a record highs on Friday as investors sought refuge from a second day of hefty losses on the stock markets, hurt by deepening concerns over slowing economic growth and the outlook for euro zone banks.
Spot gold was up 2.2 per cent at $1,866 an ounce, having peaked at $1,868 an ounce.
International gold could hit $1,900 an ounce in the next six months, driven by buyers seeking an investment safe from global economic problems, but a further rise to $2,000 looks unlikely, metals consultancy GFMS said on Thursday.
"Scrap sale has started in a small amount. If prices rise above 29,000 rupees we can see substantial amount of scrap entering in the market," said the dealer.
The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars. The rupee slid to its lowest in over six months on Thursday. India's currency, bond and interbank cash markets are closed on Friday for a local holiday.