While the Interim Budget failed to generate excitement in the stock markets, considerable interest was seen in gold futures. This, even as
physical buying in the precious metal has taken a knocking due to high prices. After the April futures contract touched a record high of Rs 14,824 per 10 gram on the Multi Commodity Exchange on February 12, the prices fell. They, however, rose again on Monday to Rs 14,729.
Various factors, including weakness in the rupee and depressed stock markets, have contributed to the rise. Although the Interim Budget did not offer any goodies to the precious metal, it had no negative impact on the bullion market unlike the stock market, which had expected sops to counter the economic slowdown.
Says Anand James, senior analyst at Geojit COM-trade, "While capital market's knee-jerk reaction was surprising, its loss was gold's gain as weak sentiments and a depreciating rupee boosted buying interest in gold. Further, if a rate cut happens before elections, which is likely sooner than later, looking at the huge government borrowings, there could more funds flowing into gold as an investment.''
Evidently, investors continue to see gold as safe investment. Investment in gold futures has outshone all others in the past three months. Since November 11, gold futures appreciated 27.9%, even as the benchmark equity index, the sensex, showed a negative return of 5.42%.
Analysts firmly believe that large investors and hedge funds are dumping other investments and diverting funds to the yellow metal over fears that the recession would be deeper than anticipated. "Prices of gold have staged upward as investors in global markets are largely parking their funds in it, just to protect the value of their money,'' said Naveen Mathur, head of commodities at Angel Broking. This can be gauged from the fact that the world's top five gold exchange traded funds (ETFs) have increased their gold reserves by 108 tonne in the past three months. The total holding of these five five ETFs has gone up to 1,080 tonne from 972 tonne.
