Gold will remain bearish despite weak rupee: Kishore Narne

In the short-term, despite weakness in the rupee, gold will continue to be bearish, says Kishore Narne of Motilal Oswal Commodity in a recommendation to Indian investors seeking to trade gold.

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In an interview to CNBC-TV18, Narne adds that globally gold has been under pressure on the market discounting an eventual tapering in the US Federal Reserve's quantitative easing programme. The analyst explains that domestic gold prices have been ruling high on stiff import duties and continuous depreciation in the rupee. Below is the edited transcript of the interview on CNBC-TV18 Q: How would you trade gold now? The shorting gains for Indian traders have been taken away by the depreciation in the rupee. Yet in rupee terms, how will you trade gold?
A: Gold has been under pressure because market has been discounting the fact that eventually liquidity will dry up because somewhere down the line the US Federal Reserve will be taking its hands off the quantitative easing (QE) programme. So, in that perspective, global gold prices have been correcting for a while now and have reached a level where a clear breakdown towards the USD 1,180-1,200-levels is visible.
On the domestic front, two factors have pushed gold prices higher. One, import duties. An import duty of almost 8 percent is currently built into gold prices. Two, depreciation in the rupee. So on an assumption that the rupee depreciated over the last six months by about 10 percent and an import duty of 8 percent, adds up to an 18-percent surge in domestic gold prices. Q: How should Indian investors trade gold?
A: In the short-term, despite weakness in the rupee, gold will continue to be bearish. Probably, there could be short-term support at Rs 26,760-26,780 right now. Eventually, it may fall back towards levels of Rs 25,000 or below. Critical for gold is the reversion in the rupee which at any point of time would add to the pressure in the domestic markets and would aggravate the fall.