Gold prices expected to rise next week

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Spot gold finished 1.1% higher at $1,238 an ounce on 3 January. Prices inched up 0.3% a week ago, when the metal remained on track to log its first annual decline in 13 years.

US gold futures for delivery in February finished 1.1% higher at $1,238.60 an ounce on 3 January.

For the week as a whole, gold futures gained 2%.

Gold lost nearly 30% in 2013 as the prospects of global economic recovery and stock market rallies dented the metal’s safe-haven investment allure.

Gold prices expected to rise in the coming week, with the upward momentum witnessed in the beginning of 2014 expected to continue into the next trading week, owing to commodity index rebalancing activity.

Two widely tracked commodity indexes, based in the US, are increasing their allocation to precious metals such as gold and silver. Both the Standard & Poor’s Goldman Sachs Commodity Index (GSCI) and the Dow Jones-UBS Commodity Index (UBSCI) could drive more money to gold. As such, traders have been stocking up on gold ahead of the five-day rebalancing that begins on 8 January for the GSCI and from 9 January for the DJ-UBSCI.

Speculator buying is expected to push up the yellow metal’s prices next week. Long term investors take positions at a very important support level and traders cover positions. There is some fund buying and bargain hunting as traders take advantage of an oversold market. Physical buying remains strong and should continue to support the market, but volume is lacking and the market needs more participants to continue its upward move.

There is a plenty of scope for gold to bounce back in 2014. The metal’s poor performance in 2013 has left the precious metal looking attractive again compared to other assets, including equities. .

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