Gold is likely to remain volatile in the coming week on robust buying sentiment overseas and a poor follow-up by jewellery buyers in India, the world’s largest importer and consumer of the yellow metal.
Global fund houses look at gold as a safe investment, especially after US non-farm payrolls data for December and January was a sharply higher revision. The worsening global economic condition may attract investors to park fund in the commodity. But, like in the past, profit booking cannot be ruled out.
Looking at gold’s behaviour in the recent past, the near-term outlook remains uncertain, especially investors’ interest towards exchange-traded funds. Gold holding in SPDR, the world’s largest paper trading fund, has remained unchanged since February 26, which shows that investors have started diverting their funds to other asset classes, including base metals and equities. Copper has seen a dramatic 20 per cent surge in prices to $3,700 in the last one week, which traders believe, is the biggest indication for fund diversion from gold.
According to an analyst with a Mumbai-based research firm, investors’ confidence will get a big boost with the production-cut plan announced by Russia’s second-largest gold producer Peter Hambro Mining Plc.
The company has announced that its production in 2010, 2011 and 2012 will not reach 1 million ounce. It has revised its 2010 production at 685,000-769,000 ounce, down from the February 2008 guidance of 957,000 ounce, and 2011 output to 793,000-903,000 ounce, down from the previous forecast of 1.03 million ounce.
Gold prices in London were $942.80 an ounce on Friday, a marginal decline from $953 in the beginning of the week, but up from the low of $900 during the week.
However, a weak rupee is making the dollar-quoted gold expensive locally, as the Indian currency is currently traded at 51.69 against a dollar.
Meanwhile, Suresh Hundia, president of the Bombay Bullion Association, believes that unless the price declines below $900 in dollar terms and Rs 14,500 per 10 gm in the local market, domestic consumers will not return with fresh investment plans.
He said that gold imports remained “nil” from February till now. In the future too, at current prices, consumers will stay away and may shift to artificial jewellery. Apprehensions are that the jewellery rentals may become a trend in near future.
The benchmark April contract for gold on the MCX extended gains for a second day and traded 0.85 per cent higher at Rs 15,528 per 10 gm on Friday. The contract is still within a striking range of an all-time high of Rs 16,040 struck on February 20.
The metal would face a “good resistance” at Rs 15,650-15,675 and have to go past Rs 15,780-15,800 in order to revisit its recent record high, said an analyst.
