Gold futures recover from three-week low

Gold futures on the Multi Commodity Exchange (MCX) rose from three-week lows on Tuesday on short covering on the back of a recovery in markets abroad.

Traders opted for continual bookings with caution as the price could head upwards due to sub-prime worries.

However, the yellow metal is still considered a safe avenue for investment. At the day's end, gold traded at Rs 10,043 per 10 gm, 0.83 per cent higher than the Monday close of Rs 9,924 per 10 gm.

However, the physical market reacted sharply to the still softening spot demand with standard and pure gold closing with marginal falls of Rs 10 and Rs 15 to Rs 10,070 and Rs 10,120 per 10 gm, respectively.

The metal's futures breached the benchmark level of Rs 10,000 for the first time in three weeks, thus witnessing an overall decline of 5 per cent. However, an air of pessimism still prevails. Fears that near month deliveries will decline to a range of Rs 9,900-9,750 are around.

According to a report by Kotak Commodity Service, gold prices are expected to test the Rs 9,850-9,650 support range for the December contract. Selling could begin from levels of Rs 9,950 - 10,100 with the risk level at Rs 10,150 per 10 gm, it added.

Open interest for December gold on MCX was at 9,453 lots, down from 9,522 the previous session. Total traded volume was recorded on Monday at 35.2 kg.

Meanwhile, Indian consumers, who abstained from festive buying, may have a better opportunity to beef up their portfolio with the metal as buying may take the price up further.

If global precious metals analysts are to be believed, India's gold imports may surpass the 2006 record level of 722 tonnes but the benchmark 1,000 tonne-mark may well be missed.

"If we incorporate early October data (40 tonnes), the total imports for the current year could have already crossed last year's level," said Ajay Mitra, managing director, World Gold Council (India).

Spot gold inched up to $780.70/781.30 an ounce from $780.10/780.90 late in New York on Monday, when it hit an intraday low of $774.90 on stock-market jitters and investors' risk aversion.

The most-active December gold contract on the Comex division of the New York Mercantile Exchange rose $3.4 to $781.4 an ounce in electronic trades.