Gold likely to reach over Rs 16,000 level before 'Diwali'

After taking a brief consolidation, gold prices are again ready for a good rally and is likely to reach over Rs 16,000 level before 'Diwali'.

According to analysts, prices of gold has declined for a short period last week as the precious metal dipped following a counter rally taken by the dollar.

However, the US dollar index has again started showing weakness and today dipped by 0.6 per cent at 76.54 level, which will be positive for the gold price, SMC Global's Rajesh Jain said.

He said gold is likely to reach 1,020 dollar an ounce (28.34 grams) level in the international markets before 'Diwali'. However, in the domestic market the rising trend is likely to be capped with strengthening of Rupee against the US dollar, he added.

In the domestic market the prices are likely to be slightly over Rs 16,000 per 10 grams level, Jain said. He said, the Rupee will keep on strengthening as the equity markets are performing well, which will encourage the Foreign Institutional Investors (FIIs) to bring in more money.

Today, the gold was trading at Rs 15,585 per 10 grams, while in the global markets it was at $1,001 an ounce.

Religare Commodities Metals and Energy In-Charge Somnath Dey opined that after the European Central Bank's yearly 500 tonnes gold sales over the prices of the yellow metal, which had dipped during last week and gone down to Rs 15,427 level, will again start picking up.

Dey said under the Central Bank Gold Agreement (CBGA) the European Central Bank sells 500 tonnes of gold every year.

The prices will continue to remain bullish till 'Diwali' on the back of strong domestic demand and is likely to be over Rs 16,000 level, he said.

Meanwhile, independent global metals analyst GFMS noted that the bull run in gold will continue as the various monetary and fiscal stimulus programmes have failed to boost the world economy, feeding through to a dis-inflationary conditions.

The US dollar, which is considered a safe haven, softens due to the weakening economic condition. As dollar declines, many investors and central banks continue to hold gold as their safe haven to protect themselves from unforeseen global economic shocks, boosting the demand for the yellow metal.