Gold to remain elevated in the short term: analysts

Greece election and US Fed meet crucial events for the bullion market

Gold price has seen an upward trend in the last few weeks in the wake of safe haven demand coming back to gold. The trend is likely to continue for some more time.

However, as fundamentals for gold are still bearish, high prices cannot continue for long. In coming days, the outcome of Parliament elections in Greece, which is one of the large debtor countries in the Euro zone, and the Federal Open Market Committee meeting, which is scheduled for next week, are crucial events that the bullion market will take note of.  The Greece elections will take place on Sunday.

In the medium-term, see some correction is expected, as the commodity has seen a rally in the last one month. Gold price has seen a nine per cent rally in the last one month on the back of uncertainty in the Euro zone.

In the domestic market, gold price has seen a 5.4 per cent rise in the last one month at Rs 28,250 per 10g. Gold is currently at a five-month high in domestic and international markets. In Mumbai market, gold is trading at a discount of $5 per ounce or around Rs 150 per 10g.

Since Greece’s debt is an issue, it needs political stability. “In the Greece election, Syriza party is expected to win. This will cause a knee-jerk reaction to gold prices, as the Syriza is looking at restructuring the debt and is also against austerity. In the short-term, gold prices may increase as safe haven asset,” said Naveen Mathur, associate director of commodities and currencies at Angel Broking. He expects gold to remain range bound and might test $1310 per ounce on the higher side.

In international gold market, gold is quoted at $1,294 per ounce, slightly lower than recent high of above $1,300.

The euro has seen a correction against dollar after the European Central Bank announced quantitative easing last week, resulting in higher gold demand as a safe haven asset. However, on the other hand, the dollar index is at a 10-year high, which will eventually cause gold prices to come under pressure in the medium term.

In the Indian market, the demand for gold continues to remain low, as prices are high. There are expectations that during the upcoming Budget, the government will bring down import duty on gold.  

“In the medium term, gold is expected to in the range of $1325 to $1330 per ounce on the higher side and may move to $1,280 per ounce on the lower side,” said Madhavi Mehta, senior research analyst at Kotak Commodity Services.

There are many others who support prices as of now. Ajay Kedia, MD of Kedia Commo-dities, expects gold prices to rise in the short term due to uncertainty in the Euro zone. Kedia expects gold to test $1,310 per ounce in the short term.

“Price of gold on the domestic market will stay in the same range till the end of the month, but, we may see some correction in prices next month. However, even at lower price points, we will not see a revival in demand,” said Suresh Hundiya, a Mumbai-based bullion trader.