Gold prices are expected to rise further in the coming months, but the uptrend is likely to reverse after the return of confidence in the equity market, a latest Citigroup report has said.
"While further economic weakness, fiscal deterioration and inflation could drive prices higher in the coming months, our commodities team believes that bullish gold is a very crowded trade and a return of market confidence will precipitate a sharp reversal in gold prices," Citi India economist Rohini Malkani said in the report.
It pointed out that while gold prices have edged up due to investors' demand and gold's safe haven status rather than the traditional growth drivers of a weak dollar and inflation.
China is reportedly buying the precious metal with its gold reserves now pegged at 1,054 tonnes from 454 tonnes in 2003, which is one of the reasons for the boost in the prices.
However, post the G-20 summit, signs of stabilising macro indicators coupled with leaders pledging to drawdown $6 billion of International Monetary Fund gold to provide concessional finance have resulted in decline in prices, it said.
Meanwhile in India, gold imports are back in positive territory after two consecutive months of zero imports, with the Bombay Bullion Association pegging imports at 10 tonnes during April 1-15, the report said.
However, the recovery in April is possibly due to the Akshaya Tritiya festive demand and thus may not hold up.
