As the gold buying season, which lasts between August to December, sets in, the yellow metal is on a firm upward march. Propped by a weak dollar and strong Asian buying, gold currently is trading at around 16-month high.
“While inflation remains a concern for the US, potential interest rate cut and worsening credit markets has been pressurising the dollar and therefore supportive to safe haven buying into gold,” said MAPE Admisi Commodity Research’s Debjyoti Chatterjee. Demand from key Asian markets like India and China is expected to continue to be robust for the rest of 2007.
The rise in the dollar denominated gold is in line with historical trends and the markets are eyeing $732 an ounce on Comex in the short term, Mr Chatterjee added. The rising crude is also helping the gold surge. Also, the fact that many mining companies are dehedging their gold is also an indicator that they are bullish on the prices.
In India, with physical buying gaining with the onset of festival and marriage season, gold prices could remain higher and in the ranges of Rs 9,250-9,415 per 10 gm. However, rising rupee remains a concern and profit taking by funds could see a short-term correction.
Mumbai-based bullion trading company AD Overseas’ SP Agarwal said gold is bullish in the near-term but is expected to come down in the next few days. A lot hangs on the condition of the dollar and crude prices. “All eyes will be on the meeting of the US Federal Reserve on September 18, which will decide how the dollar will move,” he said. The market will factor in a 25 basis point cut on US interest rates, from 5.25 but any cut over that will affect the dollar, he added.
Central Bank gold sales will also ease post-September, which would again put pressure on gold prices. “There is no news about Central Banks’ gold sales. The market is due for a correction anytime, and could see immediate support at $690. However, gold will definitely surpass last year’s highs after this,” said Chennai-based India Bullion’s Krishna Nathani.
