Analysts differ on gold prices

Global gold prices are likely to decline below the $650 an ounce mark in a fortnight. In the domestic market, however, the yellow metal is likely to rebound and move in the range of Rs 8,700 to Rs 8,900 per 10 gram during the same period.

Meanwhile, there are differences of opinion between spot and futures market analysts. Spot market analysts are bullish on gold in the wake of a growing demand against the backdrop of India International Jewellery Show 2007 (IIJS 2007) scheduled for the next month-end. But futures market experts believe the yellow metal would break the downward barrier of Rs 8,000 in the weeks to come.

Gold is currently quoted at $661.50 an ounce in London and Rs 8,765 (.999 purity) and Rs 8,720 (.995 purity), almost unchanged from the previous day, in the Mumbai bullion market.

Gold for August deliver on the MCX, however, is quoted at Rs 8,685 per 10 gram. Analysts believe that weak fundamentals may push the yellow metal down by at least Rs 20-25 in a few days, with the trend continuing in the long run.

Prithviraj Kothari, director, Riddhi Siddhi Bullion, feels that the forthcoming IIJS 2007 exhibition will spur the jewellery industry and boost the demand for gold ornaments, thereby fuelling prices. Meanwhile, the seasonal demand was gradually picking up and might take gold prices to Rs 9,300-9,500 by Diwali, added Kothari.

However, futures market analysts are bearish on the yellow metal. With the developing countries' currencies appreciating, a decline in global prices would pull down the domestic prices below Rs 8,000 by Diwali, they added.

Meanwhile, gold prices remained unchanged in Asia on Monday after the biggest weekly decline in almost two months on Friday on concern that the global economic growth may slow down, reducing the metal's appeal as a hedge against inflation. Gold for immediate delivery was little changed at $661.50 an ounce in Singapore compared with $661.20 an ounce on Friday, the lowest close since July 11.

On the Tokyo Commodity Exchange, gold for June delivery fell 16 yen, or 0.6 per cent, to 2,549 yen a gram ($669 an ounce) at the end of the morning session. The yellow metal for December delivery was up $1.30, or 0.2 per cent, at $673.60 on the Comex division of the New York Mercantile Exchange.

Gold prices fell 3.3 per cent last week amid a $2.1 trillion world stock market rout and concern that US subprime mortgage losses may slow economic growth. Investors usually buy gold when raw material prices rise to preserve wealth.