MUMBAI, SEPT 29: The yellow metal has sprinted to a two-year high level on the Mumbai bullion market following a price spiral in world markets. The upsurge in gold prices continued unabated on Wednesday with the standard gold rising further sharply by Rs 190 to Rs 4,725 per ten grams from yesterday's close of Rs 4,535, thereby strengthening the optimism that the forthcoming `Diwali' season would see the price of Rs 4,850, the level touched on May 12, 1997.Prices of ten-tola gold bar and 22-carat gold too flared up by Rs 2,250 to Rs 55,500 and by Rs 185 to Rs 4,370 from the previous close of Rs 53,250 and Rs 4,195 respectively."The jump in global prices has pushed up the cost of imported metal, but local demand is not surging because of the sharp price rise," said one dealer. Domestic traders expect gold demand to be lukewarm till prices stabilise. They said the requirement for the festival season that peaks in November would be met through recycling of the existing gold in India. "Indian demand willrevive only when the prices stabilise," said a leading trader.The World Gold Council (WCG) has welcomed the move by European central banks. Robert Pringle, head of WCG's centre for public policy studies, said in a statement today that these decisive measures by a group which accounts for some 50 per cent of all official gold holdings, would reduce dramatically the scope for rumour and speculation which has been such a damaging feature of the gold market in recent years.Pointing to the WCG's earlier warnings of instability in the gold market fuelled by speculation, Pringle said that ``we were pleased to see that central bankers shared our concern an have taken steps to limit the opportunities for unfounded rumours.''LONDON: Gold prices drove higher for the third day running on Wednesday and more gains are expected as buyers scramble for bullion after European central banks pledged to limit sales. Gold climbed to $312/315 a troy ounce after a brief early morning pullback in Europe. That was upfrom New York's close of $308.50, but down on the $327.30 overnight peak, a two-year high."It looks like the move above $305 is sustainable. The market looks like it will test $320, the top of the trading range. Then there is nothing until $340," said Gerry Celaya, senior director of treasury at American Express Bank. At its peak on Tuesday, gold was up 22 percent, or $59, from 20-year lows seen just a month ago, as Sunday's European central bank news persuaded the market gold's long-term worries were a thing of the past.Gold's three-day sprint to two-year highs this week is fraying nerves in markets already jittery that inflation may force more interest rate rises. In the United States, soaring gold and rising oil prices are sparking concern that the Federal Reserve will push up the cost of borrowing to stem the threat of inflation when it meets at its next rate-setting session on October 5.In Europe, European Central Bank Vice President Christian Noyer warned on Monday that the ECB may actsooner rather than later to head off price pressures. Analysts said the increase in the gold price could be seen as indicative of a general recovery in the world economy which could turn out to be inflationary. "This latest gold rise lends intellectual weight to arguments that commodities (generally) will climb higher as the global economy recovers," said David Brown, chief European economist at Bear Stearns.
