Gold above $1,300 on expected ECB stimulus

Internationally, outcome of the Greece elections is also awaited

The global price of gold has moved up to a four-month high, to $1,300 an ounce, with investors turning to it as a traditional safe-haven store of value.

The European Central Bank (ECB) is expected to announce a fiscal stimulus programme on Thursday, which should drive down the value of the euro. There are also the worrying implications of possible outcomes of the Greek election this weekend. The other worry for investors is the uncertainty caused by the prolonged slide in crude oil prices.

At the spot market here, gold closed at Rs 28,500 per 10g, up five per cent in 10 days. Silver has crossed Rs 40,000 a kg and on Wednesday closed at Rs 40,800.

 

Nic Brown, head of commodities research at Natixis, the Paris-based corporate and investment bank, said: “We would attribute much of the recent rise in gold prices to the anticipated QE (quantitative easing) from the ECB. Given how much of the European bond market is now sinking into negative yield, a safe-haven asset such as gold that pays a relatively generous zero yield is becoming increasingly attractive for European asset managers.”

 

In India, a sharp upturn in prices in the past couple of weeks, ahead of the marriage season, has discouraged buyers. “There is weak demand on the Mumbai spot market,” said Suresh Hundiya, a bullion trader.

Analysts say gold will continue its upward rally due to concerns on the European economy. “In the short term, the price could touch $1,340 an ounce,” said Sugandha Sachdeva, in charge of metals and currency research at Religare Commodities.

Naveen Mathur, associate director of commodities and currencies at Angel Broking, said gold will continue to increase in the short term. However, after the ECB meeting, there is a possibility of the euro depreciating against the dollar, which could put downward pressure on bullion prices.