Gold prices jumped more than 3 per cent on Friday and were poised for their best week in seven months as the intensifying conflict in the Middle East sent investors scurrying for safe-haven assets.
The price of one gram of 22K gold rose by Rs 140 from Rs 5,540 to Rs 5,400 in Kerala. The price of one sovereign gold is now Rs 44,320 compared to Rs 43,200 on Friday. A gram of 24K gold now costs Rs 6,044 compared to Rs 5,891.
Zero-yield bullion got an additional fillip from expectations that the US interest rates may have peaked. Spot gold was up 3.2 per cent at $1,928.15 per ounce by 0309 pm ET (1908 GMT). US gold futures settled 3.1 per cent higher at $1,941.50. Prices were up 5.2 per cent for the week.
Investors kept a tab on developments in the Middle East conflict, which has unnerved markets since the start of the week.
Israel said its infantry and tanks had carried out raids inside the Gaza Strip, its first announcement of a shift from an air war to ground operations to root out Hamas fighters a week after their deadly rampage in southern Israel.
This fuelled inflows into assets considered to be safe havens such as gold.
"Investors are fleeing to safe havens as the risks of Middle East tensions grow," said Edward Moya, senior market analyst at OANDA.
"If the geopolitical situation gets gloomier, there is a good chance that gold prices could go to the $2,000 levels this year. We have come from mid-$1,800s to mid-$1,900s, $2,000 is just a fraction of that." US consumer prices increased in September amid higher costs for rent and gasoline, but underlying inflation is slowing, data showed on Thursday.
Apart from the conflict, "despite yesterday's warmer-than-expected (US) inflation report, currently there is an expectation that the Fed will not hike rates in the November meeting, which is also helping (gold) prices," said David Meger, director of metals trading at High Ridge Futures.
Traders currently see around a 69 per cent chance of the Fed leaving interest rates unchanged this year, according to the CME Fedwatch tool.
Spot silver climbed 4 per cent to $22.72 per ounce, on track for its first weekly gain in three.
Platinum rose 1.4 per cent to $880.42, while palladium dropped 0.3 per cent to $1,141.24 and was set for a weekly decline.
(With Reuters inputs.)
