In subsequent quarters, gold is expected to trade below the all-time high of 19,198 rupees per 10 grams seen in early June.
Gold traded at 17,720 rupees at 11:53 a.m. on Wednesday, after hitting a 2-½-month low of 17,711, a level last seen on May 5, but still down more than 7 percent from their all-time peak.
HDFC Bank quoted gold at 17,918 rupees per 10 grams, down 1.8 percent from the previous trading session.
“Prices have fallen a lot now, and are at their support levels… we could be some accumulation at lower levels,” said a official with a state-run bank in Mumbai, which deals in bullion.
Lower inflationary pressures could dim the yellow metal’s appeal as a safe hedge.
Weak energy costs pushed U.S. consumer prices down for a third straight month in June while consumer sentiment dropped to a near one-year low in July.
“Investment demand could come down (for gold) as inflationary fears lessen,” said Gnanasekar Thiagarajan, director, Commtrendz Research in Mumbai.
Gold is expected to recover to 18,050 rupees by the end of September, a Reuters poll of 19 participants, which included 8 bullion dealing banks and 11 commodity brokerages showed.
“Going forward, we believe that price of the precious metal is likely to witness some amount of consolidation in Q3 2010, as European concerns abate,” said an economist with a private bank that is a large gold importer.
Gold futures had struck a life high on June 8 on the back of safe-haven premium on euro zone crisis and investment demand through overseas Exchange Traded Funds (ETF).
Gold may rise further in the subsequent quarters on the back of recovering seasonal festive demand in the last quarter, when dhanteras, the single biggest gold buying festival, is slated.
“Pick-up in demand is expected on account of marriages and festival season in India, which could trigger upside in prices,” said Amar Singh, head business development and research with Aditya Birla Money, a commodity broker based in Mumbai.
“Further, funds are also likely to become more active as volatility would increase in December quarter,” said Singh.
India, the world’s largest consumer of the yellow metal, imported 106.7 tonnes of gold in October-December 2009, up 82 percent on year.
Gold may rise to 18,670 rupees by the end of December quarter, and 18,700 by the end of first quarter of 2011, a poll conducted over a two-week period showed.
