Gold has once again embarked on an upward momentum as it takes on the role of safe haven asset in an environment where the Euro Zone sovereign debt crisis is far from resolved and US Federal Reserve promising to keep interest rates low until late 2014.

The Federal Reserve's move on interest rates has clearly provided the trigger for the yellow metal to stay in the positive zone and push for more in the next few days, analysts said.

“Low interest rates in America would mean cheaper money. Gold will benefit from this,” said Mr Kishore Narne, Head of Research, AnandRathi Commodities.

The yellow metal is likely to maintain its short upturn as some of economic data expected from the US do not augur well for it. Coming alongside with news of an extended low interest rate scenario and continuing crisis in Europe, gold is expected to move up, said Ms Riti Singh, Executive Research, Ventura Commodities.

Hinge on EU debt talks

Gold did get a boost from the US Federal Reserve's announcement on the interest rate scenario but its trend going forward would mainly hinge on the European debt crisis talks, Mr Narne said.

The Institute of International Finance, which is representing private creditors, is in talks with the Greek Government to come up with a solution.

“If talks don't go off well the euro would depreciate against dollar and gold could move down. If talks go well the euro may rally against the dollar and help gold move up,” Mr Narne said.

Gold, according to him, is driven mainly by news and not by fundamentals of the precious metal.

“There is no short-term visibility in gold,” he said.

At this juncture, buying on dips is the option suggested by Ventura Commodities to its investors, said Ms Singh.

In India, the rupee's movement against the dollar is another factor that would weigh on gold prices.

But if this rally sustains gold April futures on MCX could go up to Rs 28,800 per 10 gram, Mr PranavMer, Analyst, MangalKeshav Commodities, said.

According to Ms Singh of Ventura Commodities, the April MCX contract may face resistance at Rs 28,500 in the next one week and crucial support is seen at Rs 26,800 per 10 gram.

February gold futures were trading in the range of Rs 27,580-28,084 per 10 gram on MCX today. The contract is due to expire next week. April contract was trading in the range of Rs28,151-28,454 per 10 gram.

Weak Indian demand

But Indian demand for gold, both in the form of coins and bars and jewellery, has been largely muted, jewellers said.

After a spectacular performance last year, investors and consumers are largely keeping away from gold this year unless a distinct upside movement is evident.

“Gold has been moving in a range of Rs 26,500-28,500 per 10 gram. Unless it goes above Rs 28,500 we cannot say anything,” said Mr Dinesh Jain, Managing Director, P.M. Shah & Co Jewellers.

Jewellers, he said, are now hoping for a pick-up in demand after March by which time the Union Budget for 2012-13 would have been presented.

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