India gold seen easing by Dec-end, could recover later

India gold may ease by December as investors are likely to book profits amid weak physical offtake after a record-breaking rally helped in the main by a weak dollar overseas, according to a Reuters poll.

"Profit-booking could lead to downside pressure in prices after the rally," said Aurobinda Prasad, head of research, Karvy Comtrade, which expects gold to be at Rs 15,852 per 10 grams by Dec-end.

A median of the estimates of a Reuters poll of six bullion dealing banks and seven brokerages sees gold easing to Rs 16,282 per 10 grams by December end.

On Monday, gold futures on the Multi Commodity Exchange (MCX) traded at Rs 16,674 per 10 grams at 5:07 pm, after hitting a record high of Rs 16,703 earlier in the session. The contract has gained about 20% since January.

The yellow metal has struck nine record highs this year, and most of it was made this month on the back of a weak dollar overseas, which enhances gold's appeal as an alternative investment.

The dollar weakened broadly on Monday after a G20 meeting and U.S. jobs data did little to alter the view that U.S. interest rates will stay low for some time, offering investors little incentive to buy the currency.

The surge in prices has dampened physical offtake in the world's biggest market, with imports down 59 percent during January 1 to October 22 at 157.9 tonnes, according to the Bombay Bullion Association. Imports stood at 420 tonnes in 2008.

Set to rise, then fall

Analysts and dealers see inflationary pressures and an expected dollar weakness to push gold to Rs 16,500 per 10 gram level by end-March, before a pullback by June.

"Inflationary concerns and dollar weakness would help gold along with significant investment demand," said Tejas Seth, senior research analyst, SMC Global.

Gold is considered as a hedge against inflation.

A median estimate of those polled put gold at Rs 16,500 by Mar-end. However, it is also expected to fall to 16,100 rupees by June-end, the poll showed.

"Dollar is expected to strengthen by June after persistent weakness and seasonal lull in physical demand by June," said Karvy's Prasad, who expects gold to be at Rs 14,893 by June-end.

Gold demand also sees a seasonal slackness in June due to absence of festivals and weddings at that time of the year in India.