Mumbai: Gold is likely to cross the Rs 32,000 per 10 grams-mark during Diwali, riding on the back of safe haven investment demand due to rising tensions in the Middle East, the Bombay Bullion Association (BBA) said on Wednesday.
"Prices of gold may hit new highs around Diwali as rising tensions in West Asia (the Middle East) may increase demand for the metal as a safe haven investment.
"Civil war in Syria and geopolitical tensions in Iran are major factors pushing up gold prices despite the fall in physical retail demand for the metal in India, China and many other countries," BBA President and Riddisiddhi Bullions Managing Director Prithviraj Kothari said in a release.
Strong possibility of the US announcing a third round of quantitative easing to boost the economy may also drive overseas gold prices up to USD 1,800 an ounce, Kothari added.
Gold prices have been consolidating since the beginning of the year as the market is waiting for the US Federal Reserve to undertake a third round of quantitative easing.

Such a move is negative for the dollar and consequently a boost for the gold prices.
Indian investors expect RBI to announce stimulus measures at its meeting in September to boost the fragile economic recovery. "In such a scenario, we expect gold to cross over Rs 32,000 by Diwali," Kothari said.
Today, MCX gold for October delivery was at Rs 30,929 per 10 grams, while the international spot gold was ruling at USD 1,667.69 an ounce.
In the domestic spot market in New Delhi, gold of 99.9 per cent purity closed at Rs 31,350 per 10 grams. It touched an all time high of Rs 31,400 on August 27.
Ruling high prices, weak monsoon, macroeconomic uncertainty and high inflation, which has reduced the disposable surplus income of the middle class, have hit demand for gold, which could drag down the country's imports to around 700 tonnes, Kothari said.
"Demand from the rural areas, which is around 70 per cent of the total demand, will be sluggish due to poor rainfall."
According to the World Gold Council, India imported 969 tonnes of gold in 2011.
There may be a slight revival in demand as the wedding and festival season commences from early September.      

"It looks like there may be a pick up in demand, but compared to last year it will still be lower by up to 50 per cent," said Kothari.


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