Gold: Investment Demand to Pick up

Source:

...With the market having recorded a phenomenal price increase in 2007 and prospects of further increases appearing positive, old resistance levels are now turning into support levels. Whether the downside correction has run its course remains to be seen. Technical analysts assert the yellow metal will resume its uptrend.

...Despite recent corrections, GFMS gold survey continued to paint a positive picture for the outlook of the gold market.

There is belief that investment demand would drive the market up, despite physical demand showing clear signs of slowing. The report cautioned about the possibility of short- to medium-term price correction given the speed of the recent price rise and the speculative length. GFMS does view $1,000 as a clear possibility later this year.

While the medium-term outlook for gold looks positive on current reckoning, dollar is likely to be the key determining factor. Demand-supply fundamentals of the gold market are tight. Even small changes in demand or supply or both will have a disproportionately large impact on prices.

In India, very clearly, high prices have driven household buyers away. Scrap sales are expanding. Physical imports have begun to dwindle. In a market that displays volatility and rapid price rise, savvy speculators, and not actual users, benefit. Therefore, caution is needed in trading gold at these elevated levels.

With the market having recorded a phenomenal price increase in 2007 and prospects of further increases appearing positive, old resistance levels are now turning into support levels. Whether the downside correction has run its course remains to be seen. Technical analysts assert the yellow metal will resume its uptrend.

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