Gold may decline next week on liquidation by offshore funds. Friday’s correction, followed by a bounce-back, indicates the market is in a correction mode and may pull the yellow metal to $1,185 an oz as early as Monday.
“Gold will fall next week and the technical fall that supported the move last week will extend this week as well. However, overall fundamentals remain in favour and will pull the yellow metal out,” said Bhargav Vaidya, an analyst with B N Vaidya & Associates.
Last week, standard gold declined 2 per cent to close at Rs 18,515 per 10 gram in the Mumbai bullion market following a similar trend in London. Prices in dollar fell 2.21 per cent to $1,211.6 an oz after falling below $1,200 an oz on Friday. Brent crude fell 7.39 per cent while the rupee moved 1.24 per cent lower against the dollar during last week’s trading.
Despite the marginal decrease last week, gold rose 2.5 per cent in June. It ended higher in May by 3 per cent. For the second quarter, it rose 12 per cent — its seventh consecutive quarterly gain. For the first quarter of this year, it rose 1.7 per cent. On a year to date basis, gold is higher by 13.2 per cent.
Gold investors avoid opening fresh positions in the absence of firm guidance from the US market. Since the US is celebrating Independence Day on July 4, traders from other parts of the world may find an opportunity to liquidate their positions for fresh bookings on Monday. As fundamentals remain strong, prices may recover later in the week to offer profit to traders. Bullions largely ignored a government report that stated that US private payrolls rose modestly in June and overall employment fell for the first time this year.
In rupee terms, however, $1,185 an oz will translate into Rs 18,300 per 10 gram in India, which will be a very good support level for roping in investors, says Prithviraj Kothari, director of Riddhi Siddhi Bullion, a Mumbai-based bullion trader.
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Next week will set the trend for gold prices as the European Central Bank (ECB) decides interest rates on Thursday, determining a trend for the euro’s move against the dollar.
Jayant Manglik, president of Religare Commodities Ltd, said a decline in gold prices would allow newer players to trade the metal. He, however, hoped the price might not decline as expected. After trading in a tight range for most of the week, Thursday marked the second-largest decline this year, dropping three per cent to settle below $1,200 an ounce. At $1,198.65 an ounce, gold has erased gains of the past six weeks. With gold near a record high, investors are likely to have realised profits in gold to cover losses in the rest of their portfolio.