Gold prices shored up to its six-month high of $1000 an ounce on Tuesday, up nearly 16.5 percent over $858 at the start of this year. Tracking this rise, the yellow metal rose by 22 percent in the local market to its record high of Rs 26,142 per 10 grams on Tuesday.
While a globally weak US dollar, inflationary expectations and dicey equity markets world wide account for this rise, here is a more interesting reason why.
September has historically been considered as the best month for gold bulls, according to leading gold consultants Commodity Online. Since 1988, global benchmark for gold prices gained an average 3.4 percent from the end of August to the end of September. Moreover, it has been rising more than 5 percent in the past seven out of 20 Septembers.
This is because the worlds biggest gold buyer, India, which bought one-fifth of global gold supply last year, starts to stock gold in September ahead of Dewali and wedding season in October. Despite deteriorating global and local economic climate, Indian consumers and investors purchased 250 tons of gold in third quarter FY08, up 31 percent over corresponding period.
Then there are other seasonal swings which are likely to keep gold prices northbound in the upcoming months, albeit possibly with a temporary dip. These include demand pull from China - the worlds second biggest consumer - between its national day on the first day of October and Chinese New Year due to start late January or early February. Similarly, heavy gold buying is also expected, in accordance with historical trends, during and immediately after Ramazan in the Muslim world, as consumers prepare for weddings planned after the holy month.
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