Gold drops as India goes slow

A drop of almost $32 an ounce in gold price since the last week offers a good opportunity for physical buying in the short term, according to Emirates NBD.

Though gold breached the $1700 an ounce mark on October 25, the yellow metal closed at $1677.50 on November 2.

More long liquidation mixed with fresh short selling pounced on the market, where no immediate sizeable buying was evident.

However, the results of the US presidential election and bargain hunting from physical markets are expected to lend support at the current level, says Gerhard Schubert, head of precious metals, Emirates NBD.

“Some analysts expected a potential fallback towards the $1650 level, but we think this episode will be rather short-lived,” he said in his weekly report.

“The overall strength of physical buying out of India has been mixed or slightly disappointing until now and this fall in the gold price represents a great opportunity in the short-term,” the report said.

Indian media has reported that demand for gold jewellery is yet to pick up though prices of the yellow metal continued to decline.

The price fall hasn’t resulted in increased buying, but local traders expect renewed buying over the next ten days as India celebrates Diwali, the festival of lights, and a period when people buy gold jewellery.

The long-term positive outlook has been damaged and a potential attack on the $1800 level now looks a very long way off, but a lot can happen in a single week, Schubert added.
 

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