MUMBAI, Oct 8: Gold prices in India rose over 2.5 per cent on Monday trading with traders anticipating sustained demand in the aftermath of the US-led attacks on Afghanistan, dealers said.

The price of gold in Bombay in the first half hour of trade was Rs4,900 per ten grams and Rs57,000 an ounce against Friday’s closing figures of Rs4,750 and 56,150 respectively.

The price has risen sharply as traders are buying the metal anticipating a steady demand from investors in the near term given the war situation in Afghanistan. With stock markets collapsing, investors have no option but to buy the yellow metal, Bombay Bullion Association vice president Mukul Sonawala said.

He added that demand for gold should also remain high because of seasonal demand.

Indians, particularly Hindus, buy a great deal of gold from October to December during the festival and marriage season.

But World Gold Council regional director for India G.S. Pillai said prices could collapse if the military action continued for some time.

Even a reversal is possible if the war lasts. Its a well known fact that gold appreciates when others investment options collapse. However, a long drawn-out war will dampen sentiment to an extent that people may abstain from shopping totally, he added.

The price was around Rs4,300 in early September and it has already firmed by over 13 per cent in these few weeks. The near term is definitely firm for the precious metal, a dealer added.—AFP