Opec, FOMC meets may set the tone for gold

MARKET OUTLOOK

Gold is likely to remain rangebound unless decisions at two meeting scheduled next week "� Organisation of the Petroleum Exporting Countries (Opec) and Federal Open Marketing Committee (FOMC) "� influence it otherwise.

The yellow metal is targeted by funds as a safe bet against inflation. But, given the fact that the global economies are witnessing skyrocketing inflation, the opportunity for profit booking can not be ruled out on highs.

Traditionally, crude oil and gold have a diagonally opposite but strong co-relation. But, if Saudi Arabia raises output to 5 lakh barrels per day from the current 3 lakh barrels, crude oil prices may decline from the current level of $131 per barrel.

According to Karvy Commodity analyst Ashok Mittal, "Saudi Arabia may get support from other Opec members to raise output in order to correct the overheated crude oil prices. Again, no rate hike is expected at the FOMC meeting as the US economy, especially the housing and industrial sectors, is already hurting."

Apparently, the slowdown in the US economy is already putting pressure on the dollar which has depreciated against the euro to 1.5629 from 1.5300 level last week.

Gold is likely to move in a close range, said an analyst with a leading research firm. The next resistance and support levels are respectively set at $921 an ounce and $895 an ounce in the London spot market, while the same for August delivery on MCX are seen at Rs 12,750 and Rs 12,400 per 10 gm.

Last week, standard gold perked up to Rs 12,520 from Rs 12,005 per 10 gm while pure gold surged to Rs 12,580 from Rs 12,065 following huge investment by funds to close the week at $907.5 an ounce, up $41 in London.

The precious metal rose for the sixth straight session on Friday as rising energy costs and a weaker dollar sparked demand for a hedge against inflation. The yellow metal reached an all-time high of $1,033.90 an ounce on March 17.

Gold futures for delivery in August rose $3.30 to $907.50 an ounce on the New York Mercantile Exchange. The price rose 4 per cent this week. Precious metals are a traditional hedge for investors when currencies decline and costs accelerate. Gold prices denominated in the euro, yen and pound also hit record level this year as central governments lowered or kept borrowing costs steady because of the threat of a global slowdown.

The MCX gold futures was seen trading between Rs 12,350 and Rs 12,650 per 10 gm on Friday with a weekly gain of Rs 393.