Gold price may touch $700 an ounce by year-end

Gold price may touch $700 an ounce by year-end as outlook for the US dollar remains poor supported by sub-prime worries, said Paul Walker, chief executive officer, GFMS. “The sub-prime issue is just the tip of the iceberg. It is symptomatic of a larger malaise in the system,” he said, on the sidelines of fourth India International Gold Convention here.

“Outlook for the US dollar remains poor and the US economy is highly leveraged on an increasingly problematic housing market. Also, interest rate spread between the dollar and euro has fallen over the last few months,” he said.

Growing investment appetites in safe haven assets due to economic and political slowdown may pull gold up prices, he said.

He also said that total jewellery fabrication is expected to grow by a hefty 17.6% at 875 tonne in Q2 of 2007 over Q1on fresh buying from India, China and the Middle East. Physical demand for bars can increase to 85 tonne in Q2 over 68 tonne in Q1.

On bullion supply-demand overview, Rajan Venkatesh, director, Scotia Mocatta, said that Bullion Banks Association will seek permission from Reserve Bank of India (RBI) to allow interbank trade in bullion. The association will send a formal request to RBI in the next few days. Also, the association will seek permission for introducing liability instruments such as gold certificates and accumulation schemes.

“The country will have ‘India Bullion Fixing’ spot price for gold soon. This will be basically ‘benchmark’ price of gold (both buy and sell price) set through a polling system, similar in line with London fixing. We are working on it and the retail price which will be helpful for jewellers and consumers,” Bhargav Vaidya, a leading bullion analyst said.