See investment demand in gold; to touch Rs 35k: Commtrendz

Gold was seeing short covering because the entire market was betting on lower prices, says T Gnanasekar of Commtrendz Research. But now, people have suddenly discovered it is a safe haven and hence some buying is coming in, he says.

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He feels investment demand too will also soon add onto it and it will play catch up as a safe haven asset just like the dollar. If Fed decides against tapering, then this could be a secular trend, says Gnanasekar. Below is the verbatim transcript of T Gnanasekar's interview on CNBC-TV18 Q: A more medium-term question, this jump that we have seen from USD 1,240 per ounce level in gold or in the Indian market from Rs 24,000 per 10 gm, is this secular? In the medium-term for instance with a six months view, where would you see gold in rupees and dollars?
A: What has happened so far is essentially short covering because the entire market has been betting on lower prices and suddenly they discover that you have some safe haven buying coming in. Now is the point when investment demand will also add onto it and it will play catch up as the safe haven asset just like the dollar.
So, we could see this phenomenon continue. If the Fed were to say they would continue the programme and the tapering wouldn’t be there then I think we are looking at a secular trend going forward. Fundamentally, these are the factors, which are going to affect but in all probability it looks like there is some kind of a medium-term trend, which is setting in now. Q: But safe haven buying would be so secular, I thought it was only dictated by the Middle Eastern problem?
A: True, but if you realize the way it has fallen so far and the way investment demand is coming back again and if the Fed policy were to continue with the existing programme, certainly there would be some amount of secularity and also the way the EM currencies are dropping, there would be a need for a safe haven asset. Also you should consider one thing when equity started going up and gold was sold, that would see a change now, money would flow back into gold from equities.