Gold to retain allure despite profit booking

WEEKELY COMMODITIES OUTLOOK

Gold: Profit booking is likely to pull down prices by the end of this week. The yellow metal reached a new 18-year high at $489.50 last Friday.

Traders expect overseas gold at about $486 an ounce by end of this week from current level of $489-490 an ounce. This is despite bullish fundamentals.

Gold, however, is likely to remain bullish before a correction around December-end. Prior this correction, the metal is likely to touch $500 an ounce. Domestic gold prices further, are likely to remain on the higher end following weaker rupee against the US dollar, which has made gold imports into the country slightly expensive.

However, domestic spot gold at Rs 10,000 per 10 grams over next 3-4 months, as anticipated by a section of analysts, is still likely to remain a distant dream. "The price of gold has to remain within people's reach to rise further. Too high a price always chokes demand and thus, makes a price dip possible," said a trader with public bank. Domestic gold is trading at about Rs 7,200-7,250 per 10 grams level.

The fundamentals that are keeping gold bullish in the medium-term are overseas speculative fund-buying supported by inflation concerns, news that Russia's Central Bank may double its current gold reserves and the likely rise in crude oil with the onset of winter.

Traders expect fund buying to set in as more and more investors find gold a safe investment haven amid global uncertainties. The market is keenly awaiting the US Fed meet on December 13 and expects another 25 basis points rise in interest rate to 4.25 per cent, said V.Sivaramakrishan, a Hyderabad-based analyst

Asian markets, especially India are are bullish on demand front with the onset of wedding season, that may keep prices higher. However, concerns that gold demand may be hit if prices remain too-high.

Crude oil: Prices are expected to move up as US gasoline demand beings to rise during the week.

As the temperature was unusually higher at this time of the year in most parts of the US, especially MidWest, crude prices have remained weak.

But with temperature likely to move downwards by mid-week, this is likely to curtain any further downward movement below $53.61 a barrel (on NYMEX WTI December contract), said a Barclays Capital report. The report also cautions a "faltering uptrend and warns of choppy times ahead.