Gold to hover around Rs 16,000 this week

Gold prices will continue to remain bullish and are expected to hover around Rs 16,000 this week as the US dollar is showing a weakening trend amid a better demand for the metal in the domestic market, analysts said.

"We expect gold to continue with the firm trend to trade at Rs 15,500-16,000 per 10 grams level as the US greenback is weak," brokerage firm SMC Global's Rajesh Jain said.

Gold and dollar generally trend in opposite directions. The US dollar, which is considered a safe haven, softens due to 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.

Jain said that last week gold had taken a consolidation due to the past hectic rally and also on reports that the International Monetary Fund is considering to sell one-eighth of its total gold, worth about $13 billion at current price, to provide soft loans to poor countries.

Religare Commodities Energy and Metals In-Charge Somnath Dey said the bullish trend in gold is likely to continue till Diwali.

The physical demand in the domestic market will keep gold prices firm and in the international market it would be over $1,010 an ounce due to declining dollar, he said.

Gold for October contract on Multi Commodity Exchange was trading at Rs 15,820 per 10 grams, while in the global markets it was at $1,006 an ounce (28.34 grams) last week.

Other factors like China building up its gold reserves will also boost the prices of the precious metal, Dey added.