Gold rate: Analysts expect the yellow metal, silver prices to dip further

NEW DELHI: Decline in prices of gold and silver is good news for customers in the upcoming festive and marriage season, and analysts say that there is a possibility of further declines.

"In the short-term, there may be a further decline given the volatility," added D K Aggarwal, chairman and managing director of SMC Comtrade, a commodities brokerage. But no one is suggesting buying silver although there are several analysts pushing the yellow metal, a favourite of Indian housewives.

"It will move in the Rs 21,000-22,000 range (per 10 grams) in the first quarter of 2012. I see an opportunity in this current fall. Long-term worth of gold has been proved. Gold is due for a rebound as everyone wants to have it in his portfolio," said Gnashekhar Thiagrajan, director Commtrendz, an advisory firm. But the turbulence in the commodities market seen since Friday has spelt bad news for brokers, especially those operating in the futures market.

Mitesh Thacker, Technical Analyst is of the opinion that the correction in gold was the first severe decline that was seen. "I think after some kind of slight upward jump back and then some consolidation gold might resume. There are good chances of it doing that, to resume its uptrend. If the international gold prices can capture that level again that will be very fantastic and set tone for another uptrend."

He feels that the trade in silver is good for short term. "You have seen extreme oversold levels on silver and now it is bouncing back. So for the next few days you might get a proper bounce back to levels of about 54,000-55,000 kind of replacing 50% of the decline so that is a good trade in the short term. In the long term I am not very clear on silver," he opined.

According to Ashwani Gujral, Chief Market Strategist gold is the strongest commodity and should be bought on declines. "On declines try to get into gold but if the dollar starts rising again you will see them crashing once more. However, the uptrend in gold is sustainable so that is where you need to be going long. I would for the moment avoid long positions in crude or silver," he said.

Given the sharp decline, exchanges have been forced to use the circuit breaker and suspend trading several times. On Monday, MCX used the circuit breaker on four occasions in silver, while using it twice for gold as prices fell below the 3% trigger.
Vivek Kumar
PGDM 3rd Sem