Gold may get more precious in long-term’

New Delhi, June 18 A two-day rebound in the gold, which remains one of the most preferred asset class for Indians despite all the recent brouhaha over the stock market, might not still indicate an immediate uptrend, but market analysts are holding onto their bullish long-term outlook for the precious metal.

While leading global investment banks like Merrill Lynch and Deutsche Bank have raised their gold price forecasts, a Wall Street investment guru went to the extent of terming the current correction as the “last great buying opportunity” in the gold’s history.

Moreover, this bullish outlook is not just for the international markets as domestic gold prices have always been known to be driven mostly by the global cues. Anticipation of further rise in the gold, after declining more than 20% from record high above the Rs 10,000 per ten gram level scaled early in May, attracted renewed buying at lower levels and pushed gold prices northward between June 5-16.

Similar trends were witnessed in the stock market, where the benchmark Sensex bounced back by nearly 1,000 points in two days after plunging nearly 30% from its peak above 12,600 level on May 11. The analysts said that the drop in gold prices to lowest levels in more than two months also sparked renewed buying interest by investors seeking an alternative investment to the stocks and bonds.

While, the stock markets’ two-day rebound has failed to lead the analysts once again turning bullish in their near term outlooks, the commodity market observers were seen reiterating their positive forecasts even during the bearish phase of gold.

Deutsche Bank said in its latest report on gold prices that it was reaffirming its bullish outlook on the precious metal and forecasted an average gold spot price of 582 dollars per ounce for 2006, 660 dollars for 2007 and 750 dollars per ounce for 2008. Another leading investment bank Merrill Lynch went a step further and raised its gold price forecasts on the back of expectations for a weaker US dollar, potential inflationary pressure and other geopolitical factors.

Merrill Lynch’s Andrew Richards raised the 2006 gold price forecast by 125 dollars to 650 dollars per ounce and by 175 dollars to 675 dollar per ounce for 2007. Interestingly, these two bullish outlooks came during a sharp downslide across all the asset classes, including equity and commodity markets.

However, Merrill Lynch said that gold prices might remain bearish in the short-term, a view shared by most of the analysts globally and in the domestic market. At the same time, there is another group of market analysts who expect the correction to be either over or nearing an end and expect flat-to-firm trends going forward.

Peter Grandich, the founder of Grandich Publications and known as the “Wall Street Whizkid” said in his commentary on metals and mining industry, the Grandich letter, “The current correction is going to end up as the last great buying opportunity in what...Remains the greatest secular bull market in gold’s history.”