Gold prices seen rising on oil crisis, fund buying

Gold is gradually advancing towards its previous peak on the back of Saudi blast reports, Iran crisis and aggressive buying by fund managers.

Standard gold prices in India ended the week at Rs 8,060. Yellow metal lost Rs 100 in February and a gained Rs 440 this year so far.

"Today, gold is influenced more by political compulsions than fundamentals," Bhargav Vaidya, proprietor, B N Vaidya & Associates, said. "The domestic market had witnessed rangebound movement in gold prices. But with fund managers still hunting for gold, prices are picking up, an analyst said.

A report on attempted bombings at a Saudi Arabia oil plant and plunging US's orders for durable goods aided the surge by almost one per cent on Friday. During the weekend, no trader wanted to go short in his book position assuming that any price rise may change the entire scenario.

Presently, gold is trading between $547 and $555 in the international market. Prices have already started picking up technically. Early this month, gold rose to 25-year high on investment demand fuelled by high energy prices, perceived long-term weakness in the US dollar, and geopolitical tensions.

The annual Budget is not expected to bring good news for the jewellery industry, Vaidya said. Traders, who sold their positions in early Asian trade in anticipation that gold futures on the Tokyo Commodity Exchange (Tocom) futures would fall, bought back overnight as oil prices firmed.

Gold is often seen as a hedge against inflation, while a drop in the dollar makes the metal cheaper for holders of other currencies.

Although domestic gold prices track the international market movement, an absolute direction is expected only after the Budget.

But, the yellow metal price is expected to decline in the weeks ahead as it has already advanced without fundamental support. Active traders are little cautious about investing further in gold, experts said.