MUMBAI (Commodity Online): Diwali is set to ignite the gold boom in India and the prices are expected to cross Rs 20,000 per 10 gm.

According to market analysts, gold prices are expected to rise to Rs 20,000 per 10 gm and silver to run up to Rs35,000 per kg.

From the festival season of 2009 to the present one, gold has risen 25% from Rs 15,100 (per 10 grams) to Rs18,910. Silver rose more - 28%, from Rs24,040 per kg to Rs30,785.

Silver prices have increased because there was higher demand for base metals. Silver is used in a lot of industries and follows copper, zinc, etc. But as base demand will be slower and the macroeconomic picture remain dull, people will gravitate to other asset classes; so investments should be made in gold.

India's gold imports almost doubled in the first half of this year, boosted by a good monsoon and pent-up demand from the previous year when a drought hit consumers' spending capacity.

The real test of consumer appetite will come in the second half when India's festival season tend to encourage a spending spree, though much will depend on what happens to the gold price.

Gold prices hovering around current levels would lead to higher purchases at festivals and imports could rise by 10-25% year on year.

Gold at $1,300 would mean a new high in the foreign markets and would lead to new highs in the local market as well. This could bring down import growth to a range of 10-15%.

Gold below this level would be welcomed by Indians and they might revise upwards the volume they planned to purchase, possibly boosting imports by over 25%.

Silver prices attained yet another historic peak of Rs 30,785 per kilo at the bullion market on Monday on emergence of fresh buying from stockists and speculators amidst a surging trend in global markets.

In New York, gold for December delivery added 20 cents to $1,237.90 an ounce on the Comex division of NYMEX.

India Gold