The recent international developments saw gold lose Rs.1,000 per 10 grams over Thursday and Friday, and breach its 15-month low of Rs.26,500 in the domestic market. This was on the back of gold falling to a four-year low of $1,167 an ounce internationally during the week on strengthening of the dollar and better U.S. economic data as also news about Japan’s central bank deciding to accelerate the pace of quantitative easing. In Mumbai, gold moved up by Rs.70 on Saturday to close at Rs.26,380.
Commodity analysts felt that at $1,180 an ounce, gold had breached a significant technical support level. “Below this level, it is not lucrative for miners to produce gold, and they would, in all likelihood, curtail production,” said Vikas Vaid, Product Head, Commodity & Currency, Prabhudas Lilladher Group. At these levels, gold is ‘technically’ in a bearish trend and while bargain-buying could happen in spurts, there is clearly a negative bias to prices.
“Gold does not hold much fancy but for investors, there is no doubt an opportunity to buy gold as gold continues to retain its ‘safe haven’ status,” Mr. Vaid said.
In the Indian context, with Diwali buying having wound down, there is no reason for demand for physical gold to revive. A booming equity market, which rallied more than 30 per cent in the last year, is seeing investors exit gold in favour of equities.
Bhargav Vaidya, bullion analyst and director, India Bullion & Jewellers’ Association (IBJA), felt that the gold price was likely to remain weak and its price in India could decline further.
“It depends on the rupee-dollar rate and the rupee has been quite stable. We are unlikely to see any dramatic swing in price,” he said.
