Gold prices are likely to remain range-bound this week due to the lack of a firm direction. Uncertainty in the global economies, with major consumers India and China indicating a protracted slowdown, and the negative farm payroll data by the US government may keep the trend afloat at least for some time.
As a consequence, gold prices may move between $1,520-$1,550 this week, translating in the range of Rs 22,200-Rs 22,500 per 10 gram in India.
The yellow metal recorded a modest 0.2 per cent decline last week to close at Rs 22,475 per 10 gram on Saturday from Rs 22520 on Monday following a similar trend in the overseas market. Spot gold in London rose to a two-day peak of $1546.39 an oz and then pulled back later to $1,541.44, still up from $1,532.55 an ounce late in New York on Thursday. The precious metal hit a record high of $1,575.79 on May 2.
Apparently, gold priced in sterling hit a record high of 946.79 pounds ($1,548) an ounce, as a weaker dollar across a basket of currencies triggered a rush for the precious metal. Experts believe the euro’s gains accelerated against the US dollar, taking out a resistance level that could result in further gains for the euro zone single currency. Investors bet against the greenback after a bleak US payrolls report added to the evidence of a marked slowdown in the economic recovery.
“Gold prices require an absolute direction which looks absent currently. There is nothing either in support of or against the metal,” said Naveen Mathur, Associate Director - Commodities and Currencies, Angel Broking.
US employers hired far fewer workers than expected in May and the unemployment rate rose to 9.1 per cent. Non-farm payrolls rose 54,000 last month, the weakest reading since September, and the jobless rate went up as high energy prices and the effects of Japan’s earthquake bogged down economic growth.
The weaking of global economies is favourable for gold as investment in the yellow metal will prove a safe haven option against the remaining basket of avenues, said an analyst.
Generally, investors use gold as a hedge against political and economic insecurity and inflationary pressure. It typically moves in the opposite direction to the dollar, which when it falls makes commodities cheaper for holders of other currencies.
The trend of a weakening global economy may open the door for some kind of additional economic stimulus and put the risk-on trade back on the table. Also the rising euro, and, in turn, gold, the imposition of a deeper austerity plan for Greece and its struggling economy, and promises to speed up a privatisation drive in return for a new international bailout so that it can avoid a debt default are key factors.
According to Bhargav Vaidya, the trend initially looks negative hinting at a correction in gold prices. But, the downward revision will be a safe bet for investors for fresh booking.
