Gold should continue glittering

MARKET OUTLOOK

Nervousness about the US economy, record energy prices and declining dollar propelled gold by 34 per cent last year. The yellow metal touched the $1000 mark, but was unable to sustain it due to profit booking. Gold is viewed as an investment during times of economic instability and rising inflation.

Gold is set to touch $985 during the week and $1020 an oz by the end of next month, according to Kishore Narne, Head - Research, Anand Rathi.

Firstly, there has been no major check on the dollar's depreciation and this indicates further economic slowdown. With the latest US employment data far from encouraging, the manufacturing sector is bound to take a hit.

Secondly, speculation is rife that Israel may attack Iran, leading to a disruption in Persian Gulf petroleum shipments and a further rise in the crude oil prices.

Crude oil and gold move in tandem. Therefore, any rise in the oil prices will rub on to gold. Crude-oil futures for the near month delivery rose to a record $147.27 a barrel in New York on Friday.

Thirdly, hedge funds are active in commodities. The latest Barclays Capital report pointed out that commodity assets under management rose 19 per cent to $270 billion in the second quarter ended June 30.

Because of the huge appreciation in commodity prices, investments in commodity-linked medium-term notes and exchange-traded products climbed about 10 per cent to $50 billion and $45 billion respectively during the period.

"Domestic traders are running out of business as price escalation has driven buyers out," said a local trader.

In the spot Mumbai market, standard gold recorded weekly gains of 1.3 per cent to end at Rs 13,170 per 10 gram. Pure gold followed suit, gaining by Rs 170 or 1.3 per cent to end the week at Rs 13,230 per 10 gram.

The gold futures for August delivery climbed by $18.60, or 2 per cent, to $960.60 an ounce on the Comex division of the New York Mercantile Exchange. Gold recorded the fourth consecutive weekly advance, gaining by 2.9 per cent. Gold touched $969.10 during the week, the highest for a most-active contract since March 19.