Gold to shine on US job data, rising demand

Gold is likely to continue its glitter in the long run on strong fundamentals, including healthy US job data and continued consumers' interest from India, China, Malaysia and West Asia. However, a correction from apprehensive traders cannot be ruled out in the near future.

After crossing the price barrier of $660, gold would once again hit the technical crest of $668, failing which it might slip to $643, said Prithviraj Kothari, director of Riddhi Siddhi Bullion and member of the Mumbai Bullion Association.

Demand in the domestic market remained very low due to year-end blues, with almost all traders and consumers sceptical over making fresh investments. They feared about the balance sheet for the current financial year getting distorted in case of losses. Hence, despite the ongoing wedding season, the domestic demand for the yellow metal was not picking up, added Kothari.

Gold was closely linked to the movement in equities, currencies and crude oil, which have been volatile in the recent past. Stock markets in the country had made gold traders apprehensive in making fresh investments this year. Therefore, traders were puzzled with the market behaviour, said an analyst.

Meanwhile, gold was little changed in Asia on Monday, as a gain in the value of the US dollar against the Japanese yen reduced the appeal of the precious metal as an alternative investment.

Gold often moves in the opposite direction of the dollar, which rose against the yen after a US government report showed higher-than-expected employment in February, further reducing speculation that the Federal Reserve will cut its benchmark interest rate any time soon.

"There was a bit of delayed selling this morning from people who didn't have a chance to sell last Friday night,'' said Diana Ong, a trader at Ong First Tradition in Singapore. "A higher dollar usually leads to lower gold prices.''

Gold for immediate delivery was little changed at $652.75 at 12:55 pm Mumbai time. It fell as much as 12 cents earlier and declined $1.52 on March 9. In Japan, gold for delivery in February 2008 rose 19 yen to 2,503 a gram ($657) on the Tokyo Commodity Exchange at the close of trade.

A US Labor Department report on March 9 showed US employers hired 97,000 workers in February, after a revised gain of 146,000 in January. That compared with a median forecast of 95,000 in a Bloomberg survey. The Fed has kept rates at 5.25 per cent since June.

Gold futures for April delivery rose $3.40, or 0.5 per cent, to $653.50 an ounce on the Comex division of the New York Mercantile Exchange at 12:57 pm Singapore time. Prices declined 0.9 per cent last week.

Gold's losses may accelerate should lower oil prices reduce gold's appeal as an inflation hedge, analysts said. Oil fell for the third straight day.

Crude oil for April delivery fell as much as 78 cents, or 1.3 per cent, to $59.27 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

The domestic price of the metal for April delivery rose by Rs 25, or 0.3 per cent, to Rs 9,408 per 10 gram ($661 an ounce) at 1:04 pm Mumbai time on the Multi Commodity Exchange.

The domestic gold futures were up on Monday taking cues from firmer Japanese markets, but analysts said prices may succumb to a stronger dollar and weaker crude oil to fall.

"It is expected to be sideways to bearish," said Pranith Tunguri, senior analyst at Indiabulls Commodities. "We are seeing a strengthening of the dollar which is weak for gold."