Mumbai: A 4 per cent correction in international gold prices this month, a stronger rupee and pickup in wedding season demand has almost wiped off the $4 discount that the yellow metal was trading at to the market price just a week ago.

According to a leading bullion dealer, the costing has improved, resulting in gold moving to a premium of 50 cents to costing in Mumbai’s spot market.

The restoration of market parity was reflected in spot gold on Monday trading at a premium to the active gold contract on MCX, which usually trades at a premium to the spot. The India Bullion and Jewellers Association PM rate for gold was Rs 37,871 per 10 gm versus Rs 37,774 per 10 gm that the active gold contract traded at intraday Monday.

“This is an indication of demand having improved amid the recent price correction, which bodes well for wedding demand,” said Suresh Hundia, owner of bullion dealer Hundia Exports. Gold has corrected 4 per cent to $1457.43 an ounce from the beginning of the month through intraday November 25, due to a stronger dollar relative to six major currencies — reflected by the dollar index rising from 97.23 to 98.32 over the same period. The rupee also strengthened to 71.73 on November 25 from 72.08 to the dollar on November 13. This, coupled with a drop in international gold rate, was also favourable for demand.

gold-graph

However, demand for the metal from banks was still weak, with the premium still a $1 to $1.5 above the overseas rate, said a bullion desk executive of a leading bank. But, he added that if prices were to correct by another $10-odd to $1445 an ounce (31.10 gm), demand would pick up more and the bank rate would become “competitive”.

Gold broke out of the Rs 33,000-34000 range on June 20 to rise to a near record of Rs 39,823 per 10 gm on September 4, the generic MCX futures contract shows......................ET