A golden opportunity to invest in yellow metal

A rising rupee, a weak dollar and the difference between global and domestic prices would provide a good opportunity for domestic investors to reap rich returns by investing in gold, said analysts.

The domestic gold prices are continuously falling despite a rise in the international prices. A declining dollar is pushing up the global prices of the precious metal. Gold acts as an alternative investment to hedge against currency risks and its prices move inversely to those of the dollar. The strengthening rupee against the dollar has led to the domestic prices of the yellow metal declining or not rising in tune with the global prices as a strong rupee makes gold imports cheaper.

The difference in international and local prices of the yellow metal was an interesting trend and provided a good opportunity to domestic investors to invest in the precious metal and get high returns. If the rupee remained steady at the current level and the international prices came down, buying bullion at lower prices would fetch higher returns, said analysts.

The domestic demand for gold was good on Akshya Tritiya, an auspicious day for buying gold. According to analysts, there are possibilities of gold rising in the international market. Moreover, domestic investors are now learning to take a call on the currencies.

On April 4 , the 99.5 purity gold was Rs 9,370 per 10 gm, while the international price was $663.30 an ounce, with the rupee quoting at 43.47 to a dollar. Since then, the dollar declined against the rupee by 8.3 per cent. The international gold prices were up by $22.90, or 3.5 per cent, since then, while the local gold prices were down by Rs 220 during the same period. The prices basically reflected the price differences between the two currencies, said Pankil Shah, head, commodities, Motilal Oswal Commodities.

"In the very near term, gold will find support around $680 and can move up and may reach the $700 mark," said Ajay Kumar Kedia of Kedia Commodities.

"Gold may come down the next month after reaching $700. The trigger may come from the US Fed meeting on May 9," said Bhargav Vaidya, a bullion analyst. If the rupee strengthened further, it would provide a good opportunity as the oversold dollar might bounce back and give good returns to bullion investors even if the international prices did not rise, said Shah.