Dubai-based analysts are of the view that international gold prices could find a bottom close to current levels.
Demand has improved across the Gulf states and analysts say that the recent distress sales from Russia would not have a lasting impact on global tags.
Spot prices at the London markets yesterday remained strong after several days, with rates ruling at $276 levels by 18:00 IST. Prices were up to $278 per troy ounce during early morning trade, sources said.
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Domestic gold prices at the Bombay Bullion Exchange also improved, closing at Rs 4,070 per 10 gm against a previous level of Rs 4,050 per 10 gm. According to information coming through the World Gold Council's (WGC) New York-based offices, demand for gold jewellery at the US markets has picked up and this is expected to remain strong into the third quarter of 1998 (July-Sept). Marketmen say that the sentiment have turned positive towards the yellow metal following a recent decision by European central banks to hold upto 15 per cent of its foreign reserves in gold.
``The market has realised that even if the Russian selling continues, nothing big will happen. The Russian operations are two fold, selling to central banks, which would offload at the markets and actual reserves, '' an analyst at the Dubai markets said. According to the council, the demand has improved dramatically in the second quarter of 1998 and is likely to extend into the third quarter. ``The main factor is the higher consumer demand alongside lower gold prices in the US markets. Further, the US mint department, in recent weeks, has recorded the highest amount of sale of gold coins since 1978,'' a source said. The US gold demand in the second quarter of 1998 stood at 83.7 tonne, up 19 per cent over the corresponding period last year.
According to Rolf Schneebeli, ceo of WGC, and regional head, (Middle-East/India) said, ``The central banks have begun to look at their reserves as institutional investors. In terms of providing liquidity and depth, some banks may find this form of investment to be more acceptable than some of the other currencies.''
Commenting on the recent crash in gold prices, Schneebeli said, ``Even the superbears are becoming cautious. The market is slowly discovering the bottom.'' According to the chief of the World Gold Council, the demand across the Gulf states (UAE, Qatar, Kuwait, Bahrain and Oman) has risen to 39.4 tonne in the second quarter of 1998. The demand for gold through the south-east Asian markets will continue to remain poor, analysts added. ``One would need to be very cautious on the overall economic scenario in this region,'' a source said. Sources said that in some countries buying back of gold had been taking place at lower levels.