The Hindu Business Line : Despite last week’s fall, gold may hold firm

Chennai, Feb. 17 Last week, gold declined 1.87 per cent to $906.10 an ounce. The yellow metal came under pressure especially during the weekend on fears of US recession slowing demand. The fears led to panic sales but the sellers’ fears could have been misplaced.

Demand could slow down quite a few things but will gold be affected? That is a key question and there are a few factors to ponder over. On the other hand, we have to keep in mind that inflation in the US is turning out to be real. The US Fed Commission is talking of cutting interest rates further but such a monetary policy is not seen as a panacea by economists to save Washington.

Gold may have come off from a record high of $942.20 a ounce seen on January 30 but we have to bear in mind what happened earlier when gold touched $900. Then, it slid only to bounce back stronger. No one can rule out that happening, though currently it is seen gathering strength sideways before making its move upwards.

India factor

Newer theories are emerging on why gold is seen holding stronger. Not the least is the Indian factor. India’s rabi or winter crop harvest is round the corner during which marriages also take place. Farm products in India are currently on an upswing and most of the crops’ prices are much above the minimum support price announced by the Government.

And sugar is seen bullish again. Besides, the Commission for Agricultural Costs and Prices has recommended remunerative prices for farmers and among various crops, the minimum hike it has recommended is 20 per cent.

All this means more money in the hands of the farmers and gold is the first thing that will strike them for investment. Therefore, gold purchase in India could resume with the wedding season round the corner. No Indian marriage is complete without gold and that should prove a trigger point for the yellow metal’s move in the next couple of weeks. Globally, there are two other factors that can hold gold firm. One is the low interest rates for loans and the other inflation.

At three per cent, loans are cheap and the best possibility, according to analyst Mr Bill Bonner, for speculators is to buy gold.

Better asset

According to another analyst, Mr Krassimir Petrov, inflation doesn’t erode the value assets and gold is seen as a better asset than real estate.

Let’s look like this. Not all investors can invest huge amounts required to buy a real estate asset, whereas gold can be bought in small lots! There then, is the promise of gold.

More Stories on : Gold & Silver | Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Now, a mobile phone for the hearing-challenged

Realty bug bites corporate houses

Dilemma of growth vs equality

Reliance Power proposes bonus shares to non-promoters

Tata Communications (Rs 507.60): Buy

Day trading guide

Two-wheeler loans go scarce

HP forays into education with learning solutions

Despite last week’s fall, gold may hold firm

Market may see a bout of upward movements

Guarding against sub-prime in the Indian context

Tata group co ties up with Israel Aerospace