MUMBAI: India gold prices are expected to ease by end-September as the rupee is likely to strengthen and domestic demand may be subdued, a
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However, the yellow metal may harden in the fourth quarter of 2009 and the first quarter of 2010 on rising inflationary concerns worldwide, but is not expected to test its record of 16,040 rupees struck in late February.
"We expect good inflows in India and hence gradual rupee appreciation, which may weigh on gold," said a dealer with a state-run bank in Mumbai.
The Indian rupee is up nearly 8 percent from its record low of 52.2 hit in early March, due to huge foreign capital inflows into the stock markets.
The most-traded August contract on the Multi Commodity Exchange was 0.12 percent down at 14,904 rupees per 10 grams at 2:28 p.m.
Expectations of further gains in global equity markets and inflows into local stocks is keeping sentiment on the Indian rupee buoyant, currency traders say.
The exchange rate is critical for gold prices as much of the metal in India is imported and paid for in dollars.
But domestic demand, driven mostly by rural India may be dented after an exceptionally dry patch since the start of the rainy season may affect farm income to the 60-70 percent living in the rural areas.
"Lack of demand for the yellow metal may weigh on prices. Rural demand may get affected due to below normal monsoons," said Pinakin Vyas, chief manager treasury with IndusInd Bank, who sees gold touching 13,800-14,200 in the third quarter.
India's gold sales is already reeling under pressure due to high prices and economic slowdown.
Total imports stood at 63.4 tonnes from January to June, down 54.4 percent in the year-ago period, data from the Bombay Bullion Association showed.
This is expected to changed over the next two quarters.
