Gold, silver ignore stronger dollar

Kathmandu, October 14

The precious metals ignored the strength of the US dollar after a surge in demand in the key markets, with gold recording a gain of Rs 500 per tola and silver rising by Rs 15 a tola between October 8 and 13.

The dollar, which bottomed in September while the metals were peaking, has continued to rally and after an initial sell-off, gold and silver are rallying. The accepted theme is that a strong dollar means weak commodities, which are mostly dollar-denominated. But this was not the case in the review period.

“Investors and traders alike have realised that although the relationship will play out in time, the currency wars and manipulation has taken away the effect the dollar has on dollar-denominated commodities,” according to Kitco. “There is no telling how long this relationship will be estranged, but for now gold and silver look strong and should continue to rally regardless of what the dollar does.”

Gold prices in India — the second largest consumer of the precious yellow metal — traded at a premium this week for the first time in more than three months after a spurt in purchases ahead of Diwali festival next week. Diwali is a holiday period in the southern neighbour when buying gold is considered auspicious.

Moreover, Indian authorities last week withdrew the amendment to the Prevention of the Money Laundering Act (PMLA) that had made jewellers subject to anti-money laundering legislation. Jewellers felt the PMLA required them to keep records of customers’ personal identification number or tax code for transactions above INR 50,000 ($771), limiting gold sales by buyers hesitant to give the information.

Investor sentiment has improved since the government withdrew the PMLA notification, Reuters quoted Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata, as saying.

In top gold consumer China, premiums rose to between $9 and $14 per ounce over global spot benchmark rates, from $8 to $10 range offered two weeks ago, on an appreciating Chinese yuan and as investors returned from the Golden Week holidays.

In the domestic market, the Federation of Nepal Gold and Silver Dealers’ Association (FeNeGoSiDA) had fixed the rate for bullion at Rs 56,000 per tola when the market opened for trading on Sunday. Its price rose by Rs 200 a tola each day for the next two days to be traded at Rs 56,200 per tola on Monday and Rs 56,400 a tola on Tuesday. The price of yellow metal remained steady on Wednesday before edging up by Rs 100 per tola to Rs 56,500 a tola on Thursday. Its price was unchanged the next day.

Compared to first trading day of the week, gold price went up by Rs 500 per tola, but it gained significantly against previous Friday’s trading rate of Rs 55,600 a tola.

Similarly, FeNeGoSiDA had set the rate for silver at Rs 760 per tola on Sunday. Its price edged up by five rupees per tola to be traded at Rs 765 a tola on Monday and remained unchanged for the next two days. On Thursday, however, the grey metal was traded at Rs 775 per tola, a gain of Rs 10 a tola and its price remained same on Friday.

Silver price went up by Rs 15 per tola by the end of the week when compared to its rate in the beginning of the review period. But the rise was more pronounced against previous week’s closing rate of Rs 750 a tola.