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| Gold to decline on lower retail demand | |
| MARKET OUTLOOK | | Dilip Kumar Jha / Mumbai January 11, 2009, 0:09 IST | |
 Gold may see a declining trend in the coming week. The falling market of other asset classes has reduced the appeal of the precious metal as an alternative investment. Dwindling financial market sentiments has also threatened gold’s inherent claim as an inflation hedge.
Analysts have set the yellow metal’s support level at $820 per oz in London which may translate into below Rs 13,000 per 10 gm level in India. But, this would be a good buying level in the near term, said a precious metals analyst with a leading research firm.
Traders at Zaveri Bazar, the precious metals trading centre in Mumbai, have witnessed a remarkable change in consumer behaviour. Instead of investment and fashion-based buying earlier, consumers are opting for need-based gold holding, said a trader.
“Unlike earlier, they prefer to hold cash than to own a piece of gold. This is all because of the deepening US economic crisis,” he added.
According to the US Labour Department data, the US job losses last year were the highest since 1945. Additionally, The federal budget deficit is expected to hit $1.18 trillion this year as the government spends billions on industry bailouts and tax cuts.
The US government has pledged more than $8.5 trillion as of November 25 on bailouts to companies and help the country recover from an economic recession. President-elect Barack Obama has also favoured an additional stimulus package of at least $775 billion.
Last year, gold gained the least since 2004 as the dollar gained for the first time since 2005 against a basket of six major currencies.
Meanwhile, spot gold in London witnessed a marginal decline of 0.73 per cent last week to close at $847.25. Gold futures for the February delivery ended the week 2.8 per cent lower, its first decline in a month, at $855 on the Comex division of the New York Mercantile Exchange.
Standard and pure gold in Mumbai also followed suit to close with a fall of 0.37 per cent and 0.44 per cent at Rs 13,375 per 10 gm and Rs 13,430 per 10 gm, respectively.
“Volatility is the only concern for retail consumers. Once the market stabilises, buying sentiment would resume. But, surely consumers will stay away from any investment buying at this price level,” said the analyst.
Crude oil dropped as much as 5.6 per cent on Friday and was down 13 per cent to settle at $40.21 a barrel during last week. On the Multi Commodity Exchange, the Gold June ‘09 contract went down by 2.52 per cent to Rs 13,461. The Gold M February ‘09 contract fell 2.32 per cent at Rs 13,429. The Gold guinea January ‘09 contract moved down by 2.13 per cent to Rs 10,497 per 8 gm.
According to the latest report by Angel Broking, gold for delivery in February is expected to find very good support at the Rs 13,245-13,220 levels. Trading below Rs 13,080 would lead to lower prices, initially towards Rs 12,894 and then to Rs 12,760. However, resistance is observed in the range of Rs 13,430-13,460.
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