After hitting Rs 29,000 per 10g for the first time due to a 1.4 per cent slump in the value of the rupee against the greenback, standard gold in Mumbai's Zaveri Bazar slipped on profit booking by small traders.
Standard gold with .995 per cent purity settled on Wednesday at Rs 28,825 per 10g, a rise of Rs 195 or 0.68 per cent from the previous day's level at Rs 28,630 per 10g. Similarly, pure gold jumped on Wednesday to close at Rs 28,960 per 10g, a rise of Rs 205 from Rs 28,755 per 10g yesterday.
Silver also joined the rising bandwagon and recorded a spurt of Rs 260 to close on Wednesday at Rs 58,125 a kg from the previous day's close at Rs 57,865 a kg.
Attributing the price rise to a depreciating rupee, Prithviraj Kothari, managing director of RiddiSiddhi Bullion and president of the apex trade body, the Bombay Bullion Association, said, "Buyers have run out of the market. Jewellers are facing huge selling pressure both from stockists and retail consumers who want to book profit at the current high prices."
Spot gold in London fell after trading above $1,800 an ounce for the first time in nearly two months, to trade at $1,782.60 an ounce as profit booking pulled prices down, amid apprehension that the resignation of Italian Prime Minister Silvio Berlusconi may improve the picture of the euro zone investment risk. Selling pressure started in London as investors saw less reason to hold gold as a hard asset, hoping that European leaders would now re-focus on ending the region's debt crisis.
Spot gold fell 0.7 per cent to trade at $1,782.60 late afternoon after peaking at $1,802.60 an an ounce, the highest level since September 21. Earlier gold contract for delivery in December settled up $8.10 at $1,799.20 an ounce at the COMEX division of the New York Mercantile Exchange.
The sudden spurt in price hit the retail jewellery shops across the country, with fresh booking almost nil. Consequently, stockists that had booked the precious metal for retailing in small lots started offering a discount between Rs 200-250 per 10g, one of the highest discounts in recent times, to attract customers in order to generate fund from existing stocks.
Meanwhile, scrap jewellery sales have increased, as retail consumers want to make money from gold holding when the price rules high, resulting in 25-30 per cent increase in scrap sales on Wednesday.
Generally, the precious metals' sale slows for nearly a month after Diwali, to begin only in December for wedding season demand.