G. Chandrashekhar

Mumbai, Nov. 16

After surging to nearly $630 an ounce on the back of speculation that China might buy gold as part of foreign exchange asset diversification, the market has eased back as expected.

Despite weaker-than-expected US economic data, the metal is now pressured by a fall in Euro/USD and widespread profit booking.

According to experts, gold is likely to trade in a consolidation mode over the short term. As oil prices remain confined to a narrow trading band and the dollar looks to be stabilising, the recent speculative enthusiasm fuelled by talks of possible gold purchase by Central Bank of China seems to have faded away.

The technical picture too seems to be supportive of a price correction.

According to analysts, the daily situation looks overbought. $614-610 is seen as short-term target and support.

Among the platinum group metals, Johnson Matthey's Platinum 2006 interim review suggests the market is set to post another year of deficit in 2006, although small, due to a combination of strong demand from the auto-catalyst sector and healthy supply increases particularly from South Africa.

JM is more circumspect on palladium where it believes the market balance is likely to deteriorate this year relative to 2005 largely owing to a fall in demand from the jewellery sector.

(This article was published in the Business Line print edition dated November 17, 2006)
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