Just when people had started writing it off, the precious metal has staged a comeback, rising nearly Rs 550 per 10 gram over the last week, largely due to the low faith that investors have in the economy. Although internationally gold is trading at $1,662 an ounce – still 16% lower than last September peak of $1,924 – a near 15% depreciation in the value of the rupee against the dollar since September 2011 has meant that the yellow metal is back to the level last seen on December 8, 2011.

Foreign investors are no longer as bullish on India as they were a few months ago due to policy flip-flops and government inaction and they are now betting on other emerging markets for better returns. With the dollar also expected to harden due to the continued drift in Europe, the rupee is expected to test fresh lows over the next few weeks. This will make imports more expensive and gold prices will shoot up further. Besides, the marriage season demand has done its bit to push up prices in the local market.