Business Daily from THE HINDU group of publications
Saturday, Jul 15, 2006
Business Daily from THE HINDU group of publications Saturday, Jul 15, 2006 |
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Agri-Biz & Commodities
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Gold & Silver Crude, geo-political concerns driving gold G. Chandrashekhar
Glittering metal Rising uncertainty & risk on the geopolitical front driving investors towards precious metals. Crude may top $80 a barrel on hurricane threat. Recent spurts may dampen Indian demand.
Mumbai , July 14 Firming crude prices and mounting geo-political concerns continue to drive gold prices, which have already breached $660 an ounce; and are threatening to rise further. Investor interest in the yellow metal remains solid. Buying is seen continuing on dips. The sentiment is decidedly positive.
Rising tension
On the geopolitical front, tension is escalating following decision to refer Iran to the UN Security Council after the package of incentives was spurned. The possibility of imposing economic sanctions against Iran is rated high. Additional factors are North Korea's missile tests, serial bomb blasts in Mumbai and Israel's bombing.The rising uncertainty and risk on the geopolitical front - all events happening in quick succession - is driving investors towards precious metals, especially gold as a safe haven investment.The impact of the worsening global political developments can be gauged from the fact that even a firming dollar - encouraged by less than expected US trade deficit - could not arrest the bullish sentiment in the gold market. Obviously, geopolitics remains a strong price catalyst, at least for the time being.
Inflation factor
Inflation is another factor, but currently somewhat understated. Currently, there is nothing to suggest that energy market would return to the mid-$60 a barrel level anytime soon. Indeed, some experts foresee the market touching $80 a barrel, with the threat of hurricane looming large over the Gulf of Mexico.Technical experts see further upside potential next few days. Given the recent impressive recovery, they see the potential for targets to be extended to $675/oz and even to $690/oz before starting to look for the top.Indian domestic market continues to closely track the international price movements. Although some buying interest returned to the market following the price correction in May and the onset of marriage season, the recent spurts are likely to prove a demand dampener.
Another concern
An additional factor of concern - that is still developing - is the less than satisfactory progress of southwest monsoon so far. As of mid-July, rainfall is deficient by 10 per cent. It is of course well known that large crops and remunerative farmgate prices push demand for gold up.Taking a cue from gold, the sentiment in other precious metals - palladium and platinum - is also turning positive.
More Stories on : Gold & Silver | Petroleum
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