India gold traders cautious as prices seen volatile

May 9, 2006


MUMBAI (Reuters) - Indian analysts said on Monday they expect gold prices to remain volatile this week as policy-makers at the United States Federal Reserve hold a crucial meeting and the Iranian nuclear issue dominates world politics.

Gold prices could gain if the Fed meeting on Wednesday gives no indication of raising interest rates, analysts said.

But, hints of a fresh diplomatic initiative to resolve the Iranian nuclear stand-off with the West and cooling crude oil markets could see gold easing, they added.

Crude oil prices fell below $70 a barrel on hopes the stand-off could ease after Iran said it would write to the U.S. seeking to resolve the "current situation in the world."

"There could be a sell-off ahead of the Fed meet," said an analyst at IL&FS Investsmart Commodities Ltd. "So a correction is likely."

The IL&FS analyst said dips could spark off buying as investors are looking to enter the market that remains bullish in the long term.

Active buying could support the market helping prices bounce back, said an analyst at Anand Rathi Commodities.

"Our short term perspective on the market is that it would be very choppy," Kishore Narne, Anand rathi's assistant vice president, said.

Narne advised holding contracts for the next three months.