Short term correction in gold a good buying opportunity: Analysts

There might be some good news for Indian households, many of whom invest their surplus in gold. The healthy US employment report in July, which bettered economists’ forecasts by 42% in terms of jobs added, has increased odds of the US Fed raising a benchmark interest rate in September, which could be negative for gold in the short term.

A correction in the words of Kishore Narne, associate director, Motilal Oswal Commodities, is a good time to buy as the medium to long term prospects favour the metal hitting $1450, up almost $100 an ounce from Friday’s intraday level, in the next six months.

Rough calculations show that gold could correct 4%, from Rs 31,428 per 10 gm (ex-Vat) to 30,166 or in the short term (however, a falling rupee could cap the fall in the overseas rate as India is an importer).

But analysts like Narne feel a correction would be shortlived, what with falling interest rates in Britain, stimuli in Japan and a possible correction in US stocks following poor corporate earnings.

This could potentially take gold up to $1450. That roughly translates to Rs 33722 (ex-VAT) per 10 gm at Friday’s currency rate. That’s a rise of 7.3% from Friday’s intraday rate on MCX (Rs 31,428).