The yellow metal is set to witness record deliveries in October, exceeding 1,300 kg on the Multi Commodity Exchange (MCX), where the gold contracts are very liquid.

A spurt in demand with the onset of the festival season, and a crash in prices over the past two weeks have fuelled the trend. Investors were also allured by the arbitrage window due to the difference in the price in the physical and futures markets.

Up to October 4, delivery of 1,222 kg of gold had taken place and the value of the trade was nearly Rs 104 crore. The previous highest delivery of 977 kg took place for the April ’06 contract at a value of about Rs 83 crore. October 5 is the final settlement date of the contract.

In the past two weeks, the gold prices had been swinging between support level of $571 and the resistance level of $605 per ounce. It could not sustain above $600, despite heavy demand from India and Middle East and dropped, touching a low of $ 559.50 on Wednesday.

The dip in price was seen as an opportunity to invest in gold. Analysts indicated that both buyers and sellers were active in the futures market, taking advantage of the difference between the MCX price and the actual price of physical gold.

Typically, a buyer would purchase from the futures market if the price was less than the spot price. If the MCX price was higher, they would purchase from the market and sell on the MCX platform to take advantage of the better price.

Demand for gold is at its peak in the festival season between September and December. This is also a time when cash flows are robust.

Gold has been very volatile during the past few months. The recent drop in gold prices was mainly due to lower oil prices. The immediate view on the metal is very bearish leading most investors to consolidate their gains. There are indications that the price may fall further in near term.

Find More Mining News :