Gold prices in India seen recovering after massive fall

 

Gold futures in India, which hit the lowest level in more than 18 months on Tuesday, may stage a recovery as key technical indicators point to the yellow metal entering oversold territory, according to analysts.

 

Gold in India, the world's biggest buyer of the metal, has shed 21% from the record high of Rs 32,464  for 10 grams struck in November, spreading panic among investors and importers.

 

"Extremely overdone technical indications suggest a possible recovery in coming days," said Gnanasekar Thiagarajan, director, Commtrendz Research, adding that a recovery to Rs 27,450/28,000  is possible.

 

The Relative Strength Index (RSI) for MCX gold is placed below 20. Normally, when RSI goes below 30, it tends to get oversold and a possible upward correction is seen.

 

The most-active gold for June delivery on the Multi Commodity Exchange (MCX) was 67 rupees higher at Rs 25,701 per 10 grams, after falling to a low of Rs 25,270 , a level last seen in late September, 2011.

 

Buying is advised on dips to 25,300, with a stop loss of 25,100, targeting Rs 26,000 , said Thiagarajan.

 

Global gold hit an 11-month high in October last year after the U.S. Federal Reserve announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing would stoke inflation.

 

But the gain was erased by a rally in equities, talks that the Fed could soon end its bullion-friendly bond buying programme, and concerns other indebted euro zone countries could follow Cyprus' plan to sell bullion reserves to raise cash.

 

Silver for June delivery was 0.48% lower at Rs 44,166  per kg.

 

Silver may trade in the range of 42,000-47,000, said Aurobinda Prasad, head of research, Karvy Comtrade.