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G. Chandrashekhar

Various factors combining to raise speculative buying

SCALING HIGHER: Is the yellow metal going out of reach?

Mumbai , April 2

Gold has been in the consolidating phase last two months; and now a springboard for leap up is ready.

Towards the latter part of last week, a weaker dollar, gains in other commodities, fund inflows with the approach of month-end/quarter-end and ongoing geo-political uncertainty all combined to fuel speculative buying interest to push the market to newer heights.

The yellow metal gained more than $15 on Thursday last to settle only slightly below $590 an ounce, while on Friday it closed a shade less than $585/oz due to profit taking. Nonetheless, the up-trend is unmistakable. The less extensive fund length in the precious metals sector also points to the upside.

Contributing factors

There is strong possibility of a rebound. Strength of fund interest, and more importantly strong technical factors are seen contributing to further room on the upside. There are still higher highs set to come, chartists said.

The next big target of $600/oz is seen increasingly achievable, according to experts.

Positive statements reacting to central bank purchases of gold are likely to attract huge speculative interest, although the desirability of expanding gold reserves or asset diversification at yellow metal's current high prices is debatable.

The European Central Bank announced that it had sold 57 tonnes of gold, highlighting also that "it is not the intention to sell more gold for the second year of agreement (ending 26 September 2006)".

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