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A lacklustre week

Dilip Shah

Gold prices in the Indian bullion markets have bounced back after early losses on tight supplies but volumes were low, dealers and analysts said on Friday. Frequent raid and enquiries carried out by Tax officials in the Bombay bullion market has kept overseas supplies at a low ebb and bullion dealers were keeping trade to minimum level amid fear of fresh raids. "Taxing authorities are chasing revenue targets before end of the financial year and bullion market across the country may face tax-raids and enquiries in the coming months" said Mr Babubhai Jain, a leading bullion dealer. "Physical demand for Gold has actually petered out but lower than expected arrivals has helped gold prices to bounce back in thin market" he said.

Price of a gold biscuit (116.65 grams) increased to Rs 51,900-52,000 per piece from the early low of Rs 51,100-51200 while gold 24 carat has climbed to Rs 4,440-4,450 per 10 gram from Rs 4,400. Gold 22 carat was up at Rs 4,120-4,125 from Rs 4,070-4,075 during the week under review. "First round of wedding season is as good as over and now there will be un-auspicious period for one month which will end in the second week of January. This will result in the gold demand remaining more or less stagnant and will pick up in the second half of January 2000," said Mr Babubhai Jain.

Gold prices in the International market recovered lost ground and climbed to $ 280.50-281 per ounce from $ 275-276 on fresh support but volumes were low ahead of Christmas and new gear holidays. "$ 275 level is a crucial bottom and the market has turned from that level" one bullion chartist said, "if Gold falls below this level, prices will dip further by at least 8-10 dollars before this year ends" he said.

Dutch sale plan of 300 tonnes of gold and sale of 80 tonnes of gold by Russia has kept Gold prices under pressure in the World market in November and first half of December. "Now Global Gold is again moving southward but volume were low as Global players have neutralized positions to limit year end risk after a choppy trade in thin International market," said Mr Dinesh Parekh, Director of Bombay Bullion Association. Gold prices in the global markets are likely to remain depressed next year due to the fear of over supply. "Fresh Sales plan by Central banks may bring in more gold into the bullion market in the coming months" Mr Dinesh Parekh said, Swiss National Bank is likely to sale about 1,300 tonnes of gold from it's gold reserve of 2,600 tonnes. Switzerland's new currency law has authorised sale of gold and the said move has won final approval from the Swiss Parliament also. "Dutch bank has already announced it's Gold Sale plan and even Russia is offering Gold in the World market, Mr Dinesh Parekh added.

European Central Banks have decided to limit yearly gold sales to 400 tonnes but anyway this quantity will definitely enter the bullion market next year. Fourth auction of 25 tonnes of bold by Bank of England is around the corner and the Bank is likely to sell this gold in January.

Actually the market is facing poor liquidity and thin volumes may swing international gold prices in a wide range ahead of year-end and Y2K bug. "If stock markets fall ahead of the year end for fear of Y2K bug, then gold may attract fresh buying in the coming week" a bullion Chartist said, turnover of gold in London market has dropped to 25.30 million ounces in November from 37.20 million ounces recorded in October. Volumes have fallen further in the December ahead of year-end holidays. Bullion markets in the other centers are too facing poor activity and calm conditions.

Gold demand in India has fallen to 10-15 tonnes in October against 40 tonnes in September and 60-65 tonnes in August. Demand in November and December was too remained at a low-ebb. "Gold demand in India is likely to pick up in January" Mr Babubhai Jain said, year-end millennium gold sales organised by jewellers are gathering lukewarm enquiries from seasonal buyers. "Most of the Bombay people have planned to go out of station to welcome the new millennium and poor attendance in the city may push gold sale down ahead of new millennium" he said.

Dollar value against Indian rupee has picked up recently and rising oil import bill will pull down rupee value and may push up gold import cost in the country". Mr Dinesh Parekh said. Oil import bill in the current year is expected to rise by 90-95 per cent to $ 12.52 billion in fiscal 1999-2000 and oil pool deficit is likely to touch Rs 5000 crore. "Any rally in the dollars value may bring back cheer in the Indian bullion market" he said.

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