MUMBAI, August 6 (Reuters) – Indian analysts said gold prices were expected to rise beyond the psychological level of 9,000 rupees per 10 grams this week amid worries over U.S. economic growth and the rupee’s weakness.
Gold prices moved up on Monday on the back of firm overseas prices with a weaker rupee further adding to the gains. Analysts said the bullish momentum may continue to fuel gold’s rise through the week.
"Gold rises when there are problems in the world, and this is one such time," said T. Gnanasekar, director at Commtrendz Research.
"There are problems over the mortgage market and the dollar’s strength in the U.S. Meanwhile, the rupee could see a pull back in the local market as it has been appreciating for too long and a correction is due sooner or later," he added.
A break above 9,000 rupees could caution Indian buyers, though the upcoming busy season is likely to see good demand irrespective of prices as festivals and weddings prompt consumers to splurge.
The investment community, too, is getting interested again with the yellow metal moving up.
"The investment sentiment is getting revived with gold getting firmer," said Harish Galipelli, head of research at Karvy Comtrade Ltd.
Galipelli said investors would read the fine print in the U.S. Federal Reserve’s interest rate decision on Tuesday.
"If there are any signs that in the future they may lower the rate to boost the economy, gold will gain obviously," Galipelli said.
However, gold sales by any of the central banks had the potential to reverse the trend, Commtrendz’s Gnanasekar said.
"As the European Central Bank’s September deadline approaches, chances are there could be some sales," Gnanasekar said referring to the Central Bank Gold Agreement that came into force in 2004 and bound banks to cap total sales at 2,500 tonnes in 2004-2009.
Also, softening oil prices on the state of the U.S. economy were putting downward pressure, analysts said.