Equity bull run may drag down India gold prices

March 17, 2009

Commodity Online
MUMBAI: India's benchmark equity trading index Sensex is up again. And that is bad news for gold! It takes just a few sessions of bull run on Sensex to drag the gold prices back to 15,000 per 10 gm level.

That is what India witnessed past week when Sensex showed gains on Friday and on Monday. Following the bullish tendencies in the equity market due to the rise in US and global markets, bullion prices climbed down.

Gold had surged significantly in the past few months and it is likely to lose some sheen in the futures market during the week.

According to market analysts, if Sensex continues its performance, people may shift their investments from gold.

On Monday, at MCX the April contract for gold was trading at Rs 15,230 per 10 gm. On the Chicago Mercantile Exchange, it was trading at $ 923 an ounce.

The prices are likely to consolidate in the zone of $ 900-950 an ounce (28.34 gm) level in global markets and Rs 14,900-15,600 per 10 gm level in India. In the Delhi Bullion market gold on Monday traded at Rs 15,320 per 10 gm.

Weakening dollar may also affect gold prices, which might go through further correction of about 5-7 per cent in the near future.

The precious metal may also come under pressure due to profit taking by investors.

Following global trend gold may turn bearish and trade in the range of Rs 14,800-15,700 per 10 gm on MCX.

However, Religare Commodities Metals and Energy Research said the continuous de-hedging by a number of mining firms is likely to help gold prices to remain bullish.

The prices may also get support from people’s faith in gold as a safe haven for investment.

In the coming one week to 10 days, gold is likely to trade at Rs 15,500-Rs 16,500 level in the domestic futures market and at $ 960-970 an ounce at the international markets, it said.

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