Gold at 3-month low, but not for long

After falling below the psychological level of $1200 per ounce earlier this month, the yellow metal has been struggling hard to retain its shine.
With a relative calmness in the global financial market, gold prices plunged to a three-month low to $1157 per once last week. Keeping pace with the international market, metal prices in the local market also fell to around Rs32,614 per 10 grams, from a record high Rs34,242 per 10 grams touched last month.
A slew of upbeat corporate earnings reports and better home prices data in U.S have lessened the support for gold as stabilization in the equity market has been motivating investors to scramble to riskier assets for positive returns.
The US Case-Shiller index, which measures home sales in 20 U.S cities, showed home prices rose for a second month in May, surpassing market expectations and implying a positive change in the value of residential real estate market ahead.
While improved manufacturing and service sector performance in the euro-zone countries this month drove the euro higher, the currency surged to $1.30 on Thursday - up 6 percent against the greenback in July.
"It seems that asset markets are stabilizing," said Michael Gross, market analyst with Liberty Trading Group to international media. "The money that moved to gold for shelter" is flowing back into markets perceived as riskier.
This assessment seems apparent in gold holdings. The SPDR Gold Trust, the worlds largest gold-backed exchange-traded fund saw outflows with gold holding falling to around 1,282 tons by July 30, from 1,320 tons as of June 30.
Since the prospects of global recovery are still fragile, the analyst community doesn expect the market to be all doom and gloom for the yellow metal.
Weakening consumer confidence in US economy and concerns that double dip recession will eventually hit major economies sooner or later will stop many from liquidating their gold holdings.
And even if the prices fall, there is a strong likelihood that once gold prices dip further, investors in India will likely drive prices by piling up stock for the upcoming religious festivals come August.