Gold nearing $1000 on zooming oil prices

MARKET OUTLOOK

Gold is likely to hit the next technical resistances of $983 and $1010 in the near term on continued dollar weakness, record high crude price and spurring demand as an alternative investment to stocks and bonds.

Not only did the yellow metal successfully attract new funds, especially from oil countries, the dollar also fell to a record low against major currencies for a fourth day on growing signs that the US economy is slipping into a recession.

Experts believe that the currency may drop further this week on speculation that the government report will show consumer spending stagnated in January, giving the US Federal Reserve more reason to cut interest rates. To a large extent, all these factors are pushing gold prices up, an analyst with India's leading research house said.

Although physical trade in India is stagnated, jewellery makers are hopeful to see a revamp in gold demand as consumers have gradually habituated to see the yellow metal above $900.

However, seasonal demand has dried up, while need-based buying still continues, said Ashok Minawala, chairman, All India Gems and Jewellery Trade Federation.

"Hitting the psychological barrier above $1000 will see a correction of $100 to bring down the precious metal to $880, which may take even one month," said Prithviraj Kothari, director, Riddhi Siddhi Bullion.

However, scrap has flooded the market with daily arrivals of up to 120 kg. Finding the present price more lucrative, gold is coming into the market even from higher middle class, a local trader said. However, Kothari believes that traders are selling with a $10 discount in the domestic market in order to keep the money rolling.

Meanwhile, standard gold surpassed all previous records on Friday to close at Rs 12565 per 10 grams, a gain of Rs 335 or 2.74 per cent, while pure gold perked up to Rs 12620 per 10 gram, a rise of Rs 335 or 2.73 per cent from a week ago.

Gold for immediate delivery in London gained as much as $5.58, or 0.6 per cent, to a record $976.32 an ounce, and traded at $969.74 on Friday afternoon.

The surge was largely attributed to the closure of Elandsrand mine owned by Harmony Gold Mining Co, Africa's third-biggest producer of the metal, which was shut for a third day after a fatal accident on February 27. South Africa is the world's second-biggest gold producer after China.

Silver for immediate delivery rose as much as 19 cents, or 1 per cent, to $19.95 an ounce, the highest since 1980. It traded at $19.64 an ounce in Friday afternoon.

Gold futures for April delivery traded at $972.10 in electronic trading on the Comex division of the New York Mercantile Exchange, after reaching the record.