Triggered by major macroeconomic factors, gold prices are likely to continue heading north.
In the past one year, the price of gold has gone up by around 25% and recorded a new high of Rs 21,087 per 10g on the Multi Commodity Exchange on 7 March 2011.
The recent report of World Gold Council shows that domestic consumption of the metal rose to $38 billion (Rs 1.71 lakh crore), up 111%, in 2010 against $18 billion in 2009. According to market experts, the country's investment demand for gold is around 23%, jewellery demand is 75% and industrial demand is 2%. Jayant Manglik, president, Religare Commodities, says, "All major factors driving the price of gold are in favour of a continued price increase. The Dollar Index is weak, consumption figures are good, global interest rates are low and the fear of inflation still looms large due to high crude prices as well as the relentless printing of money by the US. Also, there is a general lack of confidence in investing in other assets today which drives money into gold."
| Concerns over the global security and political situation may push gold to new highs in the next couple of quarters. |
"In the near term, we may see multi-asset sell-offs due to the quake and Tsunami in Japan, but this will be for brief periods and it can create some buying opportunities for investors," Manglik adds. Additionally, the global security situation is particularly hazy with all the action in the West Asia and North Africa. So gold may reach new highs in the next couple of quarters.
"Geo-political worries and reemergence of concerns over the European debt crisis will continue to support gold prices during the year," says Reena Walia, research analyst from Angel Broking,
"If the prices of gold in the international market could breach the level of $1,445 per troy ounce (1 troy ounce equals 31.10g), it will give enough wings to gold prices that it can touch $1,480 per troy ounce and, thereafter, $1,530 per troy ounce in the coming months," says Basant Vaid, senior research analyst at Bonanza Portfolio. On 16 March 2011, the gold was trading near to $1,400 per troy ounce on the New York Mercantile Exchange.
"In the domestic markets, gold could find strong support at Rs 19,900 per 10g and, thereafter, at Rs 19,200 per 10g; immediate resistance could be seen at Rs 21,250 and, thereafter, at Rs 21,700," says Vaid.
