India gold imports may rise in Jul on lower prices.

The steep fall recently from the life time record peak of 1264.9 had attracted bargain hunting from Jewelers who have been staying on the sidelines of late due to high prices.

June imports were estimated to be as low as half of the 29.9 tonnes imported in same time last year, but with relatively lower prices when compared to June, the month of July is likely to attract more imports.

However, investment demand is less likely to surge, as risk appetite has increased lately with oil and equities firming up, keeping investors interested in these asset classes.

From a currency angle, the recent rally in EUR/USD currency cross that has ensued over a month now had eroded the currency hedge appeal of Gold.

Amongst economic events, US Advance Retail sales figure would be closely watched. With recent data pointing to less optimistic job sector in US, retail sales figure, which is a key barometer for consumer demand, is expected to have fallen 0.3% in June. This scenario should help Gold prices initially.

Meanwhile Indian consumers are unlikely to chase higher prices at this time of the year. Sensex fiddling with 18000 would be an event that could shape investment demand in Indian markets. Yet another factor that should keep Indian investors interested in would be rising inflation.

With Govt.’s moves towards deregulation of fuel prices, and with IMF lifting India's growth forecast to 9.4% in 2010 inflation would remain a concern and Gold's time tested positive returns above inflation would make the yellow metal an integral part of most investors.

The current short covering rally that is underway in International Spot Gold is expected break free of the challenge of 1213 that had proved formidable all through last week and edge higher towards 1224 to 1243.

At this point it is likely that the trend would gather enough strength to muscle its way beyond the 1243 region.

In such a scenario, expect prices to fall back towards 1180-1165 which would be an ideal level to accumulate gold with a view to participate in the anticipated end of year seasonal rallies. Alternatively, a direct rise above 1243 should signal that we would see the recent peaks of 1260 levels being revisited.

Source : Commodity Online