The Hindu Business Line : Gold may be range-bound during holiday season

The negative breakdown in the dollar during November has prompted renewed investor interest in gold, helping prices to recover from the lows reached in October.

Going forward, gold prices are more likely to remain highly sensitive to dollar movements. There is no autonomous impetus in the market at present and the oncoming holiday season would mean thin liquidity, according to experts.

If oil prices were to recover, as expected by several experts, and considering the potential for dollar weakness in the short term, the yellow metal should stand to benefit. Former Fed chairman Mr Alan Greenspan recently said he expected a dollar weakness over the next few years.

Physical demand

However, physical gold demand remains vulnerable to further price rises. The festival-buying spree in major markets (driven by Diwali and Ramadan) is over.

Yet, physical demand seems to be providing some support to retail market sentiment. Impending release of economic data would impact the prices too.

According to forex analysts, euro/dollar will trade in a consolidated mode in the very near term. Should that materialise, gold is likely to follow suit.

Market conditions could be quiet as the holiday season approaches.

Gold prices could be largely range-bound rather than make a directional break. Technical analysts have indicated support at $614 an ounce and resistance at $638 an ounce.