Gold may rebound next week on speculation that the last week’s correction may encourage stockists to book afresh in order to raise their inventories for Akshaya Tritiya on April 28.
Price sensitive retail consumers and stockists have been awaiting a correction in prices for the last 25 days since the price of the precious metal escalated beyond Rs 15,000 per 10 gm. During this period, traders remained absent and consumers abstained. In the meanwhile, investors found other avenues, including fixed deposits, for parking their funds in order to get assured returns.
“Technicals show that gold may initially rise to $885. Breaching this level would take the yellow metal to $820, the level at which it had started the rally in August 2008,” an analyst with one of the largest research firms said.
The International Monetary Fund (IMF) recently announced release of 400 tonnes from its reserves in the market. Yet in the absence of any timeframe, it may not affect the price trend. The move is part of the Central Bank Gold Agreement (CBGA) under which European banks release gold in the market. There is unlikely to be any release in the near future, according to the analyst.
After the G-20 meet, participating countries will be drafting the outlines of the $1-trillion global economic booster plan. It will take nearly three to six months for the funds to flow into the system. The plan is likely to boost the global equity market, resulting in a downward pressure on gold. But, for now, uncertainty in the financial market, confirmed by the 25-year low US job data, may persuade investors to see the precious metal as a hedge against inflation.
Most importantly, the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings were unchanged at a record 1,127.44 tonnes as of April 2. This indicates that consumers are still bullish on gold.
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Last week, gold slipped 2.48 per cent in London on falling demand in India, the largest consumer of the yellow metal. The precious metal opened at $915.84 an ounce on Monday and moved in a small range throughout the week, before closing under selling pressure at $893.15 on Friday.
In the Mumbai spot market, standard gold slumped 3.54 per cent on the week to Rs 14,585.
On the MCX, the near-month gold contract opened the week at Rs 15,110 initially, touched a high of Rs 15,315 and then fell sharply lower, breaching both initial and strong support levels. The yellow metal hit a low of Rs 14,506 and finally ended the week with a loss of Rs 616 to close at Rs 14,476.