Gold headed up on jittery equity markets

MARKET OUTLOOK

The yellow metal hit a one-and-a-half month high of $937.5 on Tuesday. It then shed its gains on profit booking by the short-term traders.

Gold is also set to move up on speculation that Israel will bomb the nuclear facilities in Iran, threatening oil supplies from West Asia. In terms of output, Iran ranks second among the member nations of the Organization of Petroleum Exporting Countries (OPEC).

"There are limited avenues for the investors to park their funds. Gold and crude are the major areas about which the investors are still upbeat. But much would depend upon the ongoing conflict between Israel and Iran," said Jayant Manglik of Religare Enterprises.

Gold is also likely to get support from the weakening dollar. The US currency is trading near a two-month low against the euro as economists forecast the European Central Bank (ECB) will raise its main refinancing rate by a quarter-percentage point and US payrolls will drop to a sixth-month low.

The currency stood at $1.5868 against the euro, compared with $1.5882 late Friday in New York, and was at 106.03 yen from 105.91 yen. If the ECB revises its rates, the euro may weaken and this could weigh on the gold prices.

Crude oil reached a record $144.57 a barrel after a US government report showed an unexpected decline in inventories.

Standard gold (.995) in the Mumbai bullion market saw volatile trading before closing with gains of Rs 250 at Rs 12975 per 10 gram on Friday. On Saturday, the precious metal jumped by Rs 25 to close at Rs 13,000 per 10 gram.

Pure gold followed suit and closed with weekly gains of Rs 250 at Rs 13035 per 10 gram on Friday, followed by a gain of Rs 25 on Saturday.

In London, the precious metal moved sharply up to $931.25, a gain of $12. Bullion for immediate delivery, which has gained 13 per cent this year due to the rising oil prices and falling dollar, slipped marginally on Friday at $942.95 an ounce. It had hit a one-and-a-half month record high of $945.68 on July 1.

Gold for August delivery was 0.2 per cent lower at $945.00 an ounce in the Comex division of the New York Mercantile Exchange.

The high price of gold is unlikely to affect the demand in India as the sentiment in the world's largest gold consuming country is different from the rest of the world.

Indian consumers buy gold out of social compulsions or purely for consumption, while the rest of the world sees it as an investment instrument.