AFP: Gold demand weak as bullion traders await price fall
MUMBAI (Commodity Online): Weak rupee turned gold futures a little stronger in the commodity bourses in India on Thursday, but bullion traders said there is weak activity in spot gold markets as dealers are expecting the yellow metal price to fall soon.
India is the world's largest bullion consumer and demand conditions is India provide cues to gold prices. Wholesale gold traders in India said that they were picking up bargains as prices retreated from record highs. Though the dollar is expected to witness downside further and gold prices are expected to trade higher, physical demand remains on the weak side.
Even slight strength in the dollar could put pressure on gold prices as the physical market demand remains weak. Overall, gold prices could gain only on the back of a weakness in the dollar.
On Thursday, gold futures went up on helped by a weak rupee, making the dollar-quoted asset expensive. The most-traded December gold on the Multi Commodity Exchange was 0.24 percent higher at 15,914 rupees per 10 grams at 10:44 a.m. The contract is still down about 1 percent from its all-time high of 16,066 rupees, struck on Oct. 23.
Traders recommended selling gold at 15,900 rupees with a stop loss of above 15,930 and targeting 15,830 rupees.
Open interest for December gold on MCX was at 13,199 December lots, up from 13,049 a day earlier. Volume on Wednesday was 35.39 kg.
Spot gold prices in the Indian bullion decline more than 1 % and made a closing below $1,030/oz on Wednesday. This fall in prices is the longest slide since March. Prices came under pressure as a stronger dollar index curbed demand for the precious metal as an alternative investment. The greenback was up for the fifth straight session against a basket of major currencies.
The recent rally in gold was mainly backed by a weakening dollar and even slight strength in the dollar could prove to be bearish for gold. A rise in risk aversion led to lower demand for higher-yielding and riskier investment assets. Investors shied away from such investments and moved to the dollar as a safe-haven. The precious metal had also taken buying cues from fast growing optimism over growing economy that fuelled inflation concerns.
In the currency market, The Euro weakened on Wednesday, sliding for the fourth straight session against the dollar. Fall in risk appetite coupled with demand for low-yielding assets put the Euro under pressure. Poor economic data from the US also raised concern over the recovery process.
