Gold may shine amid global crisis

MARKET OUTLOOK

Gold prices are likely to rise marginally this week amid uncertainty over global financial markets and the US government’s $700-billion bailout package to help the ailing American markets.

According to Harish Galipelli, the chief analyst of Karvy Comtrade, a commodity broking firm, the yellow metal may move upwards this week to touch $950 in London.

But the depreciating rupee may lead to the metal rising by least Rs 200-250 over the current level of Rs 13,000 per 10 grams in the domestic market.

Gold gains every lost momentum in the financial market. But this time the precious metal has remained subdued so far on fund houses’ unwillingness to pump additional money into the futures market.

Taking guidance from the failure of Freddie Mac, Fannie Mae, Lehman Brothers and others, funds are pessimistic over returns from equities and commodities. Therefore, they prefer to hold on to cash instead, said an analyst.

Bullion analyst Bhargav Vaidya of BN Vaidya & Associates believes that volatility in the precious metals market will continue as long as financial crisis continues in the US market.

As major fund houses are facing stress and the US economy is in doldrums, the gold market will remain unstable along with currency and crude oil markets, he added. Vaidya, however, sees the yellow metal slumping to $800 in the long run.

Meanwhile, standard gold continued to retain its status as a safe-haven investment last week and gained Rs 230 in the local precious metal market to close at Rs 13,025 as against Rs 12,795 per 10 grams at the beginning of the week. Pure gold also closed with a similar gain to end the week at Rs 13,085 per 10 grams.

Given a weaker outlook for the US economy and the dollar, increased safe-haven investment demand and improved technical factors, gold is in a strong position to move higher in the long term. Physical demand in India is expected to pick up after the end of the inauspicious Shraadh period (September 29), spurring investors and traders to buy the yellow metal ahead of the upcoming festive season. Despite high prices, India’s gold imports in August crossed the 100-tonne mark, indicating strong physical demand for the yellow metal.

On the Multi Commodity Exchange (MCX), gold for the near-month delivery perked up on the rupee’s depreciation to close the week at Rs 13,158 per 10 grams as against Rs 12,650 per 10 grams at the beginning of the week.

In London, however, the metal closed range-bound at $884.30 an ounce late on Friday evening against $868 an once early on Monday.