Gold outlook :: Motilal Oswal

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Sandeep Gupta,VP & Head-Business Associate Equity Advisory,Motilal Oswal Securities Ltd

The Gold rally gathered pace after the surprise announcement by the U.S. Federal Reserve that it was likely to keep interest rates at ultra-low levels at least one year longer than the market had previously expected. This combined with ECB pumping billions of Euros into the financial system have been the kick that gold needed to resume its rally.

Indian Gold imports were valued at US$29 billion in the previous year and was expected to rise to US$ 40 billion in the coming year due to investment demand. But, recent import duties hike have dampened & resulted in the small decline in gold demand.

 

China beat India by importing 190.6 tons of gold while Indian imports dropped 42% to 173 tons in the last quarter of 2011 . High gold prices kept Indian buyers at bay with jewellery demand falling by 44% and investment demand falling by 38%. However, India remained the biggest gold importer in 2011 with 933.4 tons in import while China imported only 769.8 tons of gold. India demand weakened by 7% while Chinese demand gained 22% for the year.

 

Rupee Depreciation could support Indian gold prices in the long-term, but near-term Rupee appreciation could cap the upside.