New Delhi: Even as the equity markets plunged, gold prices rose to their highest level by crossing the Rs 14,000 mark as the yellow metal is considered a safer investment option, market analysts said.
Panic selling continued on the bourses as the BSE Sensex crashed by more than 1,000 points earlier in the day, though recovered later to hover around the 10,500 mark.
However, in sharp contrast, a bullish trend prevailed with respect to gold as standard gold (99.5 purity) rose by Rs 255 per 10 grams to open at Rs 14,075 from Rs 13,820, while pure gold (99.9 purity) also spurted to Rs 14,145 from Wednesday's close of Rs 13,885 on the Mumbai bullion market.
The stock market was not buoyed even by the Reserve Bank of India's move to cut cash reserve ratio (CRR) by 1.50 per cent to 7.5 per cent with effect from Saturday in a bid to infuse liquidity.
"Even this move has failed to arrest falling stock prices, amid cues from falling global markets," BSE broker Ashok Dalal told PTI.
On October 6, the RBI had cut CRR by 0.50 per cent to 8.5 per cent. This, coupled with Friday's cut will inject liquidity into the system to the tune of Rs 60,000 crore.
Investors are, however, worried over the deepening US credit crisis which is now percolating to other countries and they preferred to play safe by investing in gold rather than the tumbling equity markets world over.
Meanwhile, the rupee, too, had dipped to an all time low on Friday.
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The rupee made a marginal but smart recovery at 11.53 am when it was quoted at 48.80 per dollar after touching an all-time low of 49.30. The previous all-time low was 49.07 that the currency had suffered in May 2002.
Why gold prices are rising
Experts believe that the rise in gold prices came as investor fears of a severe global economic downturn sparked a panicked sell-off of equities and crude.
Another cause for the high demand of the royal metal could be the preference for gold in the festive season in India.
Since, buying gold is associated with religious and social beliefs; the buying season has marked auspicious periods. This happens to be one of the ‘auspicious’ periods for buying gold.
Also, since gold is considered to be a safe haven investment during times of financial crisis and uncertainty.
Therefore, with banks across the world cutting rates in the face of economic crisis, the metal will gain glitter amongst buyers.
International benchmark December future on COMEX (commodities division of New York Mercantile Exchange) traded as high as $925 an ounce (31.99 gm), which is four per cent higher from Tuesday’s close of $882 .
(With inputs from agencies)
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