Gold likely to test $2100/oz in next 6 months
Gold likely to test $2100/oz in next 6 months
Gold likely to test $2100/oz in next 6 months
Despite a major slump, this year has seen the soaring of gold prices by over 30 percent, emerging as the hot favourite of the market in its good, bad and ugly phases.

Sandeep Joon, Senior Research Analyst of SMC global securities Ltd, in an exclusive interview with Ajeet Kumar of Zeebiz.com explains extensively on gold price outlook and driving factors.

Gold and silver prices are now on steady mode after a major slump. What are the reasons for this slump?

Gold and silver have witnessed sharp downside recently due to rise in dollar index which has jumped from 73 to nearly 79 recently along with massive sell off in all the riskier asset classes as bullions also tumbled lower. The steep margin hike by CME in bullion was also the prime cause of the sell off seen recently. No this downtrend would not sustain as its pace will slowdown and its prices will move in range for some time.

The current investment demand seems to be more speculative in nature. How sustainable is gold’s recent pull back?

Yes the recent investment demand is more or less been very speculative which have created sharp moves in the prices of Gold as investors are not sure about the outlook of global economy. Gold prices will tend to stabilize near 26,000 in MCX in near term.

Do you see seasonality in prices of gold as demand appears to be firm, especially during the October-December quarter?

The seasonality of yellow metal suggests that on average gold prices tend to move higher during the last quarter of the every year. Apr -June quarter tend to be little lean season for the demand of bullions as compared with the last quarter of every year. So the seasonality in gold prices favors that its prices should consolidate with upside bias in near term.

Do you think gold future is a better investment product compared to physical gold and ETF products?

Gold future have extra edge over the gold ETF, physical coins and jewelry as the margin paid is very less nearly 5-6% which gives extra leverage to the investors and they are also liquid. There is also no need to check the purity of gold in case of future market as in physical gold. There are very tailor made contact that suits need of every small investors like Gold Mini and micro in future market.

How do the returns from gold futures compare with gold ETF products and physical gold?

Gold future prices move in tandem with the gold ETF and physical gold but volatility in futures is very huge as compared to gold ETF and physical gold.

Are there any signs of further overheating or blow-out?

Gold prices will try to move in range for couple of months and final upside is yet to some as the weakness in dollar index and tensions in euro zone will prompt safe haven buying in this yellow metal. And the final blow out will take gold to high of above USD 2100 in COMEX and 30, 000 in MCX in early part of 2012.

What should an average investor do under current circumstances?

Average investors should regularly invest in gold ETF by way of monthly systematic plans because it is not possible for average investors to track and predict the future prices of gold.

How have gold products performed over investment products such as stocks, mutual funds and real estates, during the last one year?

During last one year global stock markets have performed badly and the gold have yielded more return as nearly 30% while stocks and mutual funds have yielded negative return and real estate prices have not increased so rapidly.

How much higher do you think the price of gold could go?

Gold prices will move higher in long term and the secular Bull Run in gold which started in 2001 will not end any time soon .Prices can test Rs 30,000 in domestic market while USD 2100 can be seen in COMEX in early 2012.


 
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