Mumbai: Gold is likely to hit a record high of over Rs 32,000 per 10 grams during Diwali due to rising tensions in West Asia, Bombay Bullion Association (BBA) said.
"Prices of gold may hit new highs around Diwali as rising tensions in West Asia may increase demand for the metal as a safe haven investment. Civil war in Syria and geopolitical tensions in Iran are major factors pushing up gold prices despite the fall in physical retail demand for the metal in India, China and many other countries," BBA President and Riddisiddhi Bullions Managing Director Prithviraj Kothari said in a release here Wednesday.
Strong possibility of the US announcing a third round of quantitative easing to boost the economy may also drive overseas gold prices up to USD 1,800 an ounce, Kothari added.
Gold prices have been consolidating since the beginning of the year as the market is waiting for the US Federal Reserve to undertake a third round of quantitative easing.
Indian investors expect RBI to announce stimulus measures at its meeting in September to boost the fragile economic recovery. "In such a scenario, we expect gold to cross over Rs 32,000 by Diwali," Kothari said.
Today, MCX gold for October delivery was at Rs 30,929 per 10 grams, while the international spot gold was ruling at USD 1667.69 an ounce.
Ruling high prices, weak monsoon, macroeconomic uncertainty and high inflation, which has reduced the disposable surplus income of the middle class, have hit demand for gold, which could drag down the country's imports to around 700 tonnes, Kothari said.
"Demand from the rural areas, which is around 70 percent of the total demand, will be sluggish due to poor rainfall."
According to the World Gold Council, India imported 969 tonnes of gold in 2011.
There may be a slight revival in demand as the wedding and festival season commences from early September.
"It looks like there may be a pick up in demand, but compared to last year it will still be lower by up to 50 percent," said Kothari.
First Published: Wednesday, August 29, 2012, 18:27