Saturday, September 29, 2007

Stronger rupee saves you from jitters of global gold price rise

NEW DELHI: Rupee appreciation is helping the Indian consumer. While gold prices have touched the roof in the global markets, at home the
prices remained at the same level with Indian currency gaining strength.

As dollar continues to weaken against other currencies, gold prices have spurted to cross28-year-high of $750 per ounce. However, in the domestic market the price remained around Rs 9,500 per 10 gram. On Friday, it closed at Rs 9,595 per 10gram.

The Indian currency has appreciated by over 10% in the last one year against dollar. If this was not the case, the gold would have been quoted around Rs 10,500 per ten gram.

The price of gold is normally fixed in dollar-term. But as the US currency weakened against euro, yen and rupee, rise in prices in these currencies are relatively smaller than dollar. This drove the demand of the yellow metal in international markets.Americans are also buying
gold to hedge against dollar depreciation.

The investment in gold has given a return of 7% in rupee-term in last one month. Returns in the last three months, six months and 12 months
are 9.4%, 1.8% and 7.8%respectively. But, in dollar-term, the yellow metal has appreciated 30.5% in last one year. In other currencies,
return is on the lower side because of their appreciation against dollar. Return in euro on gold investment in last one year is 16%, in
pound 14.8% and in yen26.1%.

DSP Merrill Lynch gold fund, which invested in equities of global companies, that operate in gold, has appreciated by over 25% in rupee-term in the last one month, since it got listed on the stock exchange. Executive V-P Anup Maheshwari said the bull run of yellow metal will continue.

He said gold had crossed $ 750 per ounce in 1979 and if it is adjusted for inflation since then, the present price of the yellow metal should have been over $ 1,600per ounce.

Director and CEO of Reliance Money, Sudip Bandyopadhyay said demand for the yellow metal is on the upswing in the domestic market.