Even as the global stock markets tumbled to multi-year lows amid worries over China's slowing economic growth, gold prices continue to edge higher due to increased demand from jewellers and falling rupee.
In the domestic bullion, the yellow metal prices rose for the 14th consecutive session on Monday, up Rs 150 to three-month high of Rs 27,575 per 10 gm.
Overall, the prices have rebounded by nearly Rs 3,000 since the beginning of the month. In early August, gold prices fell to five-and-a-half-year low of Rs 24,577 per 10 gm, as concerns rose over looming interest rate hike by the US central bank in September.
While a pickup in demand of gold from jewellers ahead of the wedding season helped the prices to move up, a crash in domestic stocks markets was largely responsible for the sharp rally.
The benchmark BSE Sensex plunged over 1,600 points on Monday, posting its biggest intra-day fall in seven years amid a massive sell-off in global markets. The sell-off was mainly triggered by a crash at the Chinese stock markets, which fell by over 8 percent on concerns over slowing economy.
As a result of heavy outflows from the domestic equity markets, the rupee depreciated further to fresh two-year lows. A depreciating rupee also pushed the gold prices up, as a cheaper rupee makes gold imports costlier.
However, gold prices have not witnessed a sharp rally in global markets despite a rise in risk aversion. Investors buy gold as a safe-haven investment whenever there is rout in global financial markets.
"Gold has not been able to gain any further in spite of the sharp rise in risk aversion and a noticeably weaker US dollar," said Commerzbank Corporates & Markets in a note.
Besides, the metal prices are supported by fading expectations on the US Federal Reserve rate hike in September.
