Gold Prices to go up to 16000

As spot gold prices in the local market surge to record highs, Indians are flocking to jewelry shops to sell old jewelry in the middle of the busy wedding season, when purchases usually pick up, and imports are slowing sharply.

Pure gold in the spot markets of Mumbai, the largest bullion market in the country and a benchmark for prices in other local markets, rose to 14,770 rupees ($304) per 10 grams Thursday, up from the previous high of 14,265 rupees/10 grams early in the week.

Standard gold was quoted at 14,705 rupees/10 grams, up from a previous high of 14,200 rupees/10 grams.

"About 90% of people are only coming to us to sell old jewelry," said Suresh Hundia, president of the Bombay Bullion Association. "So far in the month of February, there have been no imports of gold due to the record high prices."

The peak Indian marriage season runs from October to March. Indian prices are marginally higher than the international spot gold price of around $940.75 an ounce because of the rupee's weakness against the dollar.

India, the world's largest buyer, imports more than 90% of its annual gold demand of 700 to 800 tons.

With spot gold prices in domestic markets expected to rise further in the next couple of months due to firm investment demand in global markets, imports of gold are likely to be reduced to a trickle, traders said.

"When they (traders) can get it cheaper in domestic markets, why would they import at higher rates," Mr. Hundia said, referring to the slightly discounted price offered to sellers of old gold.

"Around 90% of the jewelers are not purchasing gold from banks as consumers are selling their old jewelry and asking jewelers to remold it, instead of buying new gold," said Pravin Mehta, president of the Madras Jewelers and Diamond Merchants Association.

Gold imports in India fell to between one and two metric tons in January, from 18 tons in the same month last year, according to Bombay Bullion Association data.

"Spot prices are likely to surge further to 16,000 rupees/10 grams in the next two months as economic concerns persist globally," said Ashwin Zaveri, a trader based in the country's largest bullion market of Zaveri Bazar in Mumbai.

A year ago spot prices of pure and standard gold were at 11,735 rupees/10 grams and 11,685 rupees/10 grams, respectively.

Mr. Hundia expects prices to correct a little before rising again to around 15,200 rupees/10 grams by March, tracking global prices.

However, Bhargava Vaidhya, a director with Vaidhya & Associates, said the current rally is unlikely to be sustained for long as demand has totally dried up and the Indian rupee looks set to strengthen against the U.S. dolla

Gold Dips Ahead Of Fed Meeting

Gold eased on Tuesday as investors turned their back on the metal ahead this week's Federal Reserve meeting on interest rates, which may offer directions to the dollar and precious metals.

Gold often takes cue from movements in the dollar because of its role as an alternative investments to currencies, stocks and bonds. Trading was thin with Japanese players away for a holiday.

Gold fell to $890.00/891.00 an ounce from $891.65/892.65 late in New York on Monday, when it hit an intraday day high of $895.50 an ounce on speculative buying driven by record high oil CLc1.

The metal was still trading well below a lifetime high of $1,030.80 an ounce hit on March 17, with attempts to revisit the level met by heavy profit taking.

"Everybody is waiting for the Fed," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"I think gold has to stay above these levels before it can charge higher again. The range is still the same at between $880 to $900 for today and tomorrow."

The euro edged up to $1.5653 , while the dollar was steady against the yen 104.13 yen in thin trade as dealers awaited the outcome of the Fed's two-day policy meeting which ends on Wednesday.

Gold Might Loose Its Shine

Last week, gold prices declined below $900 an ounce. At the outset, a short-term weakness seems to have fully set in gold, despite a minor recovery on Friday to $889.

A major reason for gold’s fall last week was the strengthening of dollar. With the US President, Mr George Bush, saying that things are likely to look up from this week, we may see gold’s sheen wearing off a little more this week. Among other dampeners for gold last week was the World Gold Council’s report for the first quarter of this year. The report shows fall in demand across all sectors.

In particular, jewelery demand has declined sharply in the first quarter, basically since gold prices had ruled high during the period. It even touched a record $1,034 on March 17. The overall indication is that physical demand for the yellow metal is yet to see any significant pickup. In the futures, too, there have been interesting developments, signalling this fall.

Long speculators have been cutting down their holdings. Open interest of long speculators, who make up 47 per cent of the non-commercial holdings in gold, has declined to 2.02 lakh from 3.15 lakh that was witnessed when gold was at its peak. Other long position holders also seem to be shedding their holdings.