Gold prices expected to rebound, says PHD Chamber

Gold prices may be witnessing short-term corrections but the precious metal is expected to bounce back in the medium-term as its attraction as a hedge against inflation and weak economic fundamentals remains intact, PHD Chamber today said.

"Going forward, international macro-economic factors suggests that the bull run in gold market will continue and sustain in coming years too," PHD Chamber said in a statement.

After crashing by Rs 3,250 in the last four days, gold prices recovered to Rs 26,600 in the national capital yesterday.

The industry body said gold is viewed as a tool not only for hedging inflation, it is now seen as a hedge against weak economic fundamentals, which cause severe economic downturns such as high unemployment, rising fiscal deficits, high debt-GDP ratios, sluggish output and weak currency scenarios.

"The recent fall in gold prices is merely a mass profit booking triggered by panic selling in the wake of anticipations of gold selling by some European economies like Cyprus in view of financial crisis," PHD Chamber said.

It, however, said there may be some short term corrections due to some cyclical components and some strength in US dollar vis-a-vis weakening of the Eurozone economies.

"However, gold prices are expected to again re-emerge in the high trajectory and prices of USD 1800 per ounce in the international market during the medium term cannot be ruled out," PHD Chamber said.

The chamber, however, said the fall in key international commodity prices will help emerging and developing economies like India to improve their current account balances, recent years' trend suggest that the fall may not be sustainable during the medium to long term. PTI KIR KSR