Gold to rebound on fresh investments

MARKET OUTLOOK

Gold prices are likely to rebound this week on stock replenishment by funds and fresh investments by global players in the next quarter.

"Gold is inflexible. The prices have started recovering from its recent lows, which indicates that traders have started replenishing their stocks to offset their losses," said Bhargav Vaidya, an analyst with a Mumbai-based research house, B N Vaidya & Associates.

Fundamentals still remain bullish as traders are now buying the metal above $900. With crude also hovering above $100, traders are largely eyeing the movement of yen against dollar.

According to industry experts, the government of Japan will be keen on a weak dollar so that "petro fund" from West Asia and funds from major investment bankers would be diverted towards other asset classes including gold and yen.

"The undertone is bullish as traders have started consolidating their position to park their funds fresh into gold," said Jayant Manglik, head - commodities, Religare Enterprises.

Although the domestic demand was still weak, consumer buying was expected to resume shortly, Manglik said. He estimated gold prices to perk up at least by 5-7 per cent in the next 16-18 weeks.

Meanwhile, a latest report by Anand Rathi said that low crude prices may prevent gold from climbing previous peaks immediately, but in the long-term, the gains may extend up to $1,105 an ounce towards the third quarter and $1,250-1,270 an ounce by the end of this year.

The report, however, cautioned if the recent efforts of Federal Reserves succeeded in clearing the sub-prime issues and the US economy posted a strong rebound, the precious metal prices might fell to $790. But experts said such possibilities looked far fetched.

In the last 10 days, gold prices fell 1.46 per cent to $944 despite liquidation by long term investors. In Mumbai precious metals market, the fall was sharper "" 7.24 per cent in standard and 7.13 per cent in pure variety. The metal ended the week at Rs 12,040 per 10 gram (.995) and Rs 12,105 per 10 gram (.999) on Saturday.

The metal fell to $926.50 before rising to $933.30-934.20 an ounce on Friday against $951.80-952.60 in New York late on Thursday. Last week, it hit a record high of $1,030.80 an ounce before tumbling to a one-month low of $904.70.

Although, the fundamentals for precious metal remain upbeat, profit-booking on the top has put the market in turbulence, said an analyst.

The dollar edged higher but hovered not far from record lows against the euro after US data showed inflation pressures were tame in February, affirming expectations of further interest rate cuts by the Federal Reserve to boost a weakening economy.

Despite India being the largest consumer of yellow metal, the output has fallen 6.6 per cent to 10.93 tonnes in the April-February from 11.70 tonnes during the same period last year.

But, the availability of gold is unlikely to remain a constraint as the scrap recovering is witnessing an all-time high between 20 and 30 kg a day.