Gold prices have surged three percent on yesterday’s trading which has boosted the investors’ confidence in the yellow metal. According to reports the increase in gold prices is due to a slide in the dollar’s value. Additionally, investors in gold feel that a temporary deal to avoid a U.S. debt default might prompt the Fed not to reduce its monetary stimulus.
The deal to raise the U.S. debt ceiling had a positive role in the rise of gold’s prices as unusually heavy buy orders dramatically lifted the gold market by $40. The benchmark U.S. Comex gold futures contract for December delivery got sharp price swings where spot gold rallied to a high of $1,324.06 per ounce.
Some estimates say that the prices at $1,300 an ounce indicate that the yellow metal is heading for its best week in two months. In fact, the gold prices are up 3.5 percent this week in the best showing, the only better time was before Aug. 16. Earlier the U.S. lawmakers reached an agreement that funds the government through Jan. 15, 2014.
Though it is a temporary measure, it has nevertheless worked for the investors who were losing confidence in gold. If gold prices and fluctuations is kept in perspective it is evident that the precious metal lost 21 percent this year on expectations the Fed will slow its $85 billion-a-month of bond buying as the economy improves.
The recent U.S. debt deal is being seen as positive for gold by market participants as according to some analysts it is good. Earlier, gold hit a three-month low this week as the U.S. shutdown failed to generate strong safe-haven bids.
Gold Premium hit a record $100 an ounce
India which imports a lot of gold provides a promising market for the precious metal. In fact, even when the gold prices were sliding, it was faring better in India as the country has never satiating demand for gold. Recently, gold premiums in India hit a record $100 an ounce which when compared with London prices, are more than eight percent higher on a shortage of supplies.
A major contributor in it are Banks which are importing the yellow metal chiefly for exporters following the guidelines for 80/20 principle i.e. jewelry exporters get priority for supplies over domestic manufacturers. Moreover, as the festive season has just begun in India, the gold buying spree will go on.
To contact the reporter of this story: Jonathan Millet at email@example.com