For the first time ever, gold appears to be nudging the $570.77 (Rs 30,000) per ten gram mark in India, driven by consistent investment and speculative demand in the country. Gold prices have surged all of last week to touch a new peak at the bullion market, with prices edging past the crucial $562 per ten gram mark on Saturday.  Because of the premium paid for gold on Indian markets this price level, equivalent to around $1773/oz, is higher than that quoted on Western markets.

The precious metal appears to have staged a comeback, rising nearly $12 per 10 gram over the last week. Traders said although internationally gold is trading at $1,662 an ounce, it is still 16% lower than the last September peak of $1,924.

“There is also a 15% depreciation in the value of the rupee against the dollar since September 2011, which has meant that the yellow metal is back to the level last seen on December 8, 2011,” said a bullion dealer.

Silver has also edged higher on stray industrial support. Silver gained by $0.30 per kilo to settle at $1,080.78 ($33.62/oz). Traders said after a bull run in 2011, the yellow metal had been witnessing a range-bound trade on sustained profit taking by retailers.

Analysts are of the opinion that gold prices could well rise over 15% over the next 12 months given the uncertain economic environment. “The UK appears to have gone into a fresh recession and ratings agency Standard & Poor’s has issued a warning to India and downgraded Spain’s sovereign rating. All these are factors that are sure to bump up the price of gold further,” said Sonamull Shan, bullion trader in Mumbai.

He added that though the impact of higher taxes had resulted in a downslide in gold sales across the country, this had a short term effect and that sales would pick up soon. In January, India doubled its import tax on gold to 2%. In March, a Union Budget proposal increased the tax to 4%.

Analysts said gold’s roller coaster ride may continue for some time, before peaking once again given the robust demand from India and China. “Investors will continue to seek refuge in its safe haven status. Standard and Poor’s cut the top notch credit rating for the US, the debt crisis appears aggravated in Europe. We are not doing very well in India. Given the uncertainties about the fate of the global economy and closer home, the yellow metal will continue to soar to new heights,” said an analyst with a broking house.

As the Indian economy staggers, with foreign investors no longer as bullish on India as they were a few months ago due to policy flip-flops and government inaction, bullion traders across the country are gearing up for higher prices and better returns from the precious metal.