Gold prices closed at Rs32,585 per 10 gram, up 2.5% from Monday’s levels, according to the Bombay Bullion Association.
Prices inched up internationally as well by 1% to $1,421 on worries of rising risk to global growth from expected tapering of quantitative easing in the US starting next month.
This risk is particularly strong for the already moderating emerging economies like India and China, said experts.
Geopolitical tensions, particularly relating to Syria, exacerbated fears of near-term disruptions to oil supply, given the chances of Western military action against the Assad regime for suspected use of chemical weapons on civilians last week. This led to safe-haven buying of precious metals, experts said.
But the global price rise got magnified in India, the largest importer of gold, with the rupee sinking to another record low of 66.24, a fall that began in May on foreign fund outflow.
“The tension in the middle-east has led to safe haven buying of precious metals, and if rupee continues to depreciate then I will not rule out another 500-700 rupees jump in gold prices in a couple of days,” said Chirag Sheth, vice president at Latin Manharlal Commodities.
Several measures taken by the government and the Reserve Bank of India in recent weeks have not helped stem the fall, experts said.
“People are sceptical and are questioning the effect tightening will have on global growth. SPDR Gold Trust exchange-traded fund (ETF), the world’s largest gold ETF, is buying gold again,” said Naveen Mathur, associate director, commodities and currencies, Angel Broking.