Gold price to drop in India after record surge

MUMBAI (Commodity Online): Gold price has been zooming these days. But bullion analysts say peak gold has reached and it is time the prices of the yellow metal drop substantially.

According to Somnath Dey, Religare Commodities' metals and energy in-charge gold prices in India are set for a dip by next week. "There is no buying activity of gold these days in jewellery shops. Gold is very highly volatile these days," Dey told PTI.

Analysts like Dev has blamed a rush of investor-buyers for pushing gold price to over Rs 17,000 level, saying the yellow metal will get cheaper by about Rs 500 per ten gram by next week on profit-booking. Investors are expected to book profits after the recent record-breaking rally, and would come down to below Rs 17,000 level soon.

Gold on India's MCX for December delivery was trading at Rs 17,131 per 10 grams today. The yellow metal today hit a new record at the New York Mercantile Exchange at $1,148.10 an ounce (28.34 grams) for the December delivery following a 0.37 per cent dip in the dollar index. The price volatility is mainly on account of continued weakness of the dollar and the recent selling of 200 tonne gold by the IMF to the Reserve Bank to raise money for lending to poorer countries, he said.

According to brokerage firm SMC Global's Rajesh Jain, gold is likely to consolidate within the Rs 16,800-17,400 range in the domestic market as it is overbought now. At the moment high prices are getting support from weakness in the American greeback. I n the international market gold may trade between $1,090-1170 an ounce range, he added.

The spike in gold price is also attributed to the reports to the effect that many central banks are showing interest in increasing their reserves, a bullion analyst at Karvy Comtrade pointed out. He said, recently the Mauritius government bought two ton ne gold from IMF and Sri Lankan also disclosed that it has been gradually buying gold to increase its reserves, which all together helped spike the price. The price, he said, is likely to find support at Rs 16,700 per 10 gram and resistance at Rs 17,150 .