If the metal drops below this support level, it could tumble to a low of $763, a level which was last seen in October 2007. But for this to happen, "the war of words between the leaders of the two countries would have to degenerate into a real confrontation," said Bhargav Vaidya of B N Vaidya & Associates, a city-based research firm.
However, if gold holds the $850-level for the next couple of days, prices could move up. Today, retail demand is fairly dull in the local market with specks of seasonal buying.
"However, investment demand may bounce back if the current trend of price decline continues," said Vaidya.
"Gold is cooling off," said an analyst with a large research firm based in Mumbai. "Today, gold is losing its appeal as a hedge against inflation. Although there was some recovery on Friday, the overall sentiment is likely to remain subdued in the near future as the metal has failed to keep pace with the gains in the energy basket."
A sell-off is likely to continue over the next few months. "In the short-term, the price is likely to drop below $860. In the medium term, it could drop below $780 offering a good buying oppportunity," said Jeffery Christian, managing director, CPM Group in New York.
He, however, was confident of the precious metal moving up to $1,100 towards the end of this year. Gold remained subdued last week with prices falling 2.5 per cent to $886 from $905.75 in London. Gold fell sharply on heightened speculation that the Federal Reserve may be nearing the end of a series of interest-rate cuts.
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