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Indian analyst sees further price falls in gold

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Updated: 00:00 GMT, Jan 1, 1970 | Published: 09:13 GMT, Jul 21, 2015 |
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Gold stabilized on Tuesday (July 21) holding just above a five-year low, but investors still see further price falls a day after the metal tumbled 4 percent.  Reflecting losing interest in gold, holdings in top gold fund SPDR Gold Trust fell to the lowest since 2008. Bullion, after sliding on Monday (July 20) by the most since September 2013, is trading just above the critical $1,100 an ounce support level, another breach of which could lead to a further selloff, traders and analysts say.

An Indian analyst, Sunil Shah, said the gold prices were headed for a further fall in the months to come. “In the time to come I feel if the American economy still stays robust and continues to grow at two to three percent growth, it will be positive for dollar, it will be positive for global economy and in the event if the crude oil prices ,they don’t cross above $75, then gold will go down further,” said Shah.

A looming increase in U.S. interest rates has been a key driver in gold’s descent along with sluggish demand in top consumers China and India. China disclosed on Friday (July 17) a 57 percent increase in its gold reserves from 2009, far less than the market had estimated.

Huge volumes sold on a key Shanghai physical contract hastened gold’s 4 percent slide in a matter of minutes on Monday, as China appears to be shunning bullion. Investors have found less and less reason to hold bullion as a safe haven, with the dollar strengthening ahead of what is expected to be the first increase in U.S. interest rates in nearly a decade.

Gold’s slide has helped wipe out half the gains from the last decade’s historic Bull Run, taking prices back to a key chart level and threatening a break towards $1,000 an ounce. But the price is unlikely to fall sharply again on Tuesday as it did when it fell 13 percent over two consecutive trading days in April 2013. Gold holdings at SPDR, the world’s largest gold-backed exchange-traded fund, dropped to 22,327,678.15 ounces on Monday, the lowest since August 2008.