Mumbai: Gold prices are seen easing by June-end as early signs of recovery in the world markets may reduce the safe-haven appeal of the yellow metal, analysts said.
However, the third and fourth quarters of 2009 may witness hardening of gold prices as inflationary expectations build up thanks to a slew of government spending measures, a Reuters poll of 15 banks and brokerages showed.
Gold may fall to Rs13,995 per 10 grams by June-end, Rs15,000 by September-end and Rs15,830 by December-end, the median of their estimates shows. The futures traded at Rs14,488 on the Multi Commodity Exchange at 1.03 pm in Mumbai.
“The recent economic measures are likely to support the economy from moving deep in to recession thereby taking off the sheen from gold,” said Harish Galipelli, head of research with Karvy Comtrade, who expects gold to drop to 13,000 by mid-June.
A world-wide credit crunch in mid-September has plunged key economies across the globe into deep recession, prompting central banks to execute co-ordinated rate cuts and governments to step up spending to stimulate demand and boost output and jobs.
Gold prices are down about 10% from their all-time high of Rs16,040 per 10 grams struck on 20 February.
Recent spending initiatives by governments such as the $787 stimulus package in US and the two-year 4 trillion yuan plan by China may fuel inflation expectations, spurring demand for gold, which is used by investors are a hedge against rising prices.
“The huge government spending is likely to fuel the inflation in the economy,” said a dealer with a state-run bank in Mumbai.
Analysts said for a medium term perspective, investors are recommended to buy gold at the “value area”.
The prevailing correction will continue and the area of 13,500-13,700 can be denoted as “value area” as it is stuffed with two distinct technical supports, said Amrut Deshmukh, a senior technical analyst with Way 2 Wealth Securities.
“One in the form of neckline of previous triple bottom and another as 50% Fibonacci retracement,” said Deshmukh.