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Monday, March 16, 2009

Gold Trend May Turn Bearish On Firm Stock Markets - Analysts

Gold, which surged significantly in the past few months, is likely to loose some of its sheen in the futures market during the week as the equity markets are showing signs of recovery following positive global cues, say analysts.

"If the positive performance of the stock market, which was witnessed during last week, continues in the same momentum people may shift their investment from gold, putting pressure on the precious metal," brokerage firm SMC Global's Vice- President Rajesh Jain said.


On Multi Commodity Exchange (MCX) the April contract for gold was trading at Rs 15,230 per 10 grams today, while on the Chicago Mercantile Exchange (COMEX) the it was trading at $ 923 an ounce.

Gold Futures have been in a correction mode during the past week also due to profit booking at higher levels. On Saturday, Gold April contract ended at Rs 15,315 per 10 grams.

Checkout: Should You Buy Gold at Current Gold prices?

Jain said, the prices are likely to consolidate in the zone of $ 900-950 an ounce (28.34 grams) level in global markets and Rs 14,900-15,600 per 10 grams level in the local futures market. In the Delhi Bullion market gold today traded at Rs 15,320 per 10 grams.

According to Bonanza's Head Commodity Research Tarun Satsangi weakening dollars against other currencies 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, who want to take advantage of the current prices, Jain added.

Following global trend gold may turn bearish and trade in the range of Rs 14,800-15,700 per 10 grams on MCX, he said. On COMEX it may trade at $ 890-960 an ounce level.

Lack of confidence of investors on the precious metal at higher level is also likely to hit gold prices, he added.

Echoing the views, Geojit Comtrade's Senior Analyst Anand James said gold is likely to witness slight bearishness to trade at Rs 14,900-15,600 per 10 grams level due to better performance in equity market in the last few trading sessions. However, on the long to medium term gold remained bullish.

In a sharp contrast, Religare Commodities Metals and Energy Research In-Charge Somnath Dey believes the continuous dehedging 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, Dey pointed out.

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, Dey said.

Common investors
Checkout the statement made for traders. Buying at this level is going to be an expensive deal, says Naveen Mathur, Head of Commodities, Angel Commodities. Gold has moved very sharply in past few months in commodity markets. I strongly believe price correction in gold prices would happen soon. Do not get caught at these price levels. Gold is quoting very hoigh right now.

Ideally, an investor should have 15-20 per cent allocation in gold. If you have more than 20 per cent you can consider selling and if you think you allocation is not enough, it’s time to buy and balance your portfolio. Gold is an commodity and although it is performing exceedingly well, it doesn’t mean you should buy gold out of your entire investment allocation.

Apart from physical gold, best way to invest in gold could be via gold ETF. These are function like a mutual fund scheme for gold investment and is held in paper or dematerialized form, like stocks. Here you have advantages like you will not be paying any charges that normally jeweler charges. The brokerage that you would be paying will be definitely lesser in demat paper gold format.

GOLD ETF Mutual Fund Returns
Reference: EconomicTimes.com

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