Yellow metal takes sheen off equities

Having burnt their fingers in the recent stock market meltdown that wiped off over Rs 2 lakh crore of investors' wealth, people have started parking funds in precious metals.

Gold prices have appreciated by about 2 per cent since July 27, while in the same period the stock market's benchmark index, Sensex, has lost over 5 per cent.

In the domestic market, gold prices are currently being quoted at over Rs 8,800 per ten gram, after dropping to nearly Rs 8,720 level on July 27. Analysts expect it to cross Rs 9,000 level this week and Rs 10,000 mark by 2007-end.

The BSE Sensex had plunged by 542 points on July 27, another 615 points on August 1 as foreign institutions pulled off funds in wake of the US subprime lending crisis. Yesterday, the index shed over 235 points.

"The next trigger will be provided after the US Federal Reserve's meeting on interest rate later tonight," an analyst with commodity brokerage house Karvy Comtrade said.

The gold prices would get a boost if the US central bank indicates reduction in the interest rates, he said, adding that such a stance is likely in view of a slow down in the US economy.

Gold prices price might touch Rs 10,000 level by year-end, the analyst said, adding that the short-term trend would be clear only after the Fed meeting.

In the international market, gold prices have plunged by about $10 per ounce to $660 on July 27, but since then it had recouped all its losses and is currently trading at about $670.

Domestic markets have also seen gold prices recouping its losses since July 27, even though the plunge was identical in gold prices as well as stock market on the first day of the recent downtrend.

In comparison, the benchmark Sensex is still nearly 700 points down from the levels before the downtrend began on July 27. The three falls in the Sensex on July 27, August 1 and August 6, have taken the cumulative net loss in investor wealth to close to Rs 2,18,000 crore.