Economic Uncertainty Could Bring Back Yellow Metal Into Green Zone

Gold down, but may rebound

DESPITE seeing a price correction of close to $100 an ounce (31.10 gm), bullion analysts expect gold to bounce back soon as uncertainty persists in the global economy. The yellow metal is down 9% at $910 per ounce levels from $1,000 level in February. This is due to lacklustre demand in physical markets and investors and hedge funds shifting their focus to equities that have rallied smartly in recent days.
    High gold prices have hit jewellery sales. Gold scrap that is coming to the markets has also affected the imports. Sales are also down in other countries such as the UAE following the crash in property prices and low tourists arrivals.
    Earlier this year, a risk aversion play saw gold gaining substantially as equity markets tanked. Now it is the reverse that is happening, says KN Rahaman, deputy research head at brokerage Way2Wealth. "Profit booking will take place in equities and gold will again move up," he adds. He said that gold will soon touch $940-$950 level and in a months time it is expected to touch $960.
    Following positive US housing index and inflation numbers, the Dow Jones Industrial Average moved up to 7,400 levels from first week of March level of 6,470. From 13,000 levels last year, Dow Jones had substantially fallen and was now witnessing buying. But Amar Singh, research head at Angel Commodities said that it is too early to say that the rally will last as factors like GDP number from India and China are not that good while IMF foreseeing a deeper recession in rich economies.
    "Overall the uptrend in gold remains intact as long as spot gold does not come down below $890. We saw gold touching $1,000 level because of economic uncertainty and gold remains a best bet in such times," Mr Singh added.
    In domestic market, on Wednesday, spot gold is down from Rs 15,700 per 10 gm in February to Rs 15,050 in Mumbai market. On MCX, the April contract on Wednesday at 7.18 PM was down by 1.3% to Rs 14,946 per 10 gm from the previous close. In the local market the appreciation of rupee is further pressurising the prices. On Wednesday rupee appreciated to 51.28 against the previous close at 51.49.
    According to Jayant Manglik from Religare Commodities gold will be under pressure for some time and in a month's time will bounce back.
FACT SHEET
Price of Yellow Metal Has Been Retreated due to lacklustre demand in physical markets
Investors and hedge fund
managers also shift their focus to equities on the back of recent rallies High gold prices have hit jewellery sales across the board