By DEBIPRASAD NAYAK
MUMBAI – Gold and silver spot prices in Mumbai, India's largest bullion market, rose to all-time highs Monday, tracking firm overseas markets, and as investment demand remained firm.Pure spot gold hit a record 21,225 rupees ($473) per 10 grams, while silver reached a new high of 54,970 rupees a kilogram, the Bombay Bullion Association said.
Last week in India spot gold hit a high of 21,065/10 grams, while silver touched a record of 52,115/kg.
The overseas gold price rose to a fresh high Monday as escalating violence in Libya spurred a rally in oil markets, fueling inflation fears and boosting demand for the yellow metal as a safe-haven asset. Overseas spot silver is trading at its highest level in three decades.
"We still have some room left for further upside movement in prices, as nobody is sure when the Libya crisis will end," said Anand James, chief analyst with Geojit Comtrade Ltd.
Gold is often bought as an inflation hedge and is benefiting from broad investor interest after crude futures rallied to their highest in more than two years.
Oil climbed amid an escalation in the fighting between opposition forces in Libya and the military loyal to Moammar Gadhafi, raising concerns that the world's 12th-largest oil exporter is heading towards a prolonged civil war and, furthermore, that the unrest may spread.
In India, the ongoing wedding season is also boosting demand, said analysts. Buying and gifting of gold jewelry rises in India mainly during festivals and weddings.
Jewelry purchases are also picking up in India as farmers' incomes have increased on a better harvest. Most farmers invest in gold and silver jewelry as they aren't exposed to other forms of asset classes in the country.
India's food grain production is expected to rise 7.2% to 234 million metric tons this crop year through June due to higher planting.
High prices are unlikely to dent demand for gold and silver as people are now getting used to these prices, said another analyst.
Gold imports by India jumped 59% in 2010 thanks to strong demand for jewelry, and the momentum is likely to continue this year, the World Gold Council said in February.
The south Asian nation imported 918 metric tons of the yellow metal last year, compared with 578 tons in 2009.
Write to Debiprasad Nayak at debi.nayak@dowjones.com
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