India gold seen above 13,000 this year on financial woes

A salesman poses with a gold necklace at a jewellery shop in Jammu July 11, 2008. Indian gold prices are seen above 13,000 rupees per 10 grams at the end of the next two quarters as the world reacts to high inflation, financial turmoil and geo-political tensions by buying more of the yellow metal, a Reuters poll showed.

MUMBAI (Reuters) - Indian gold prices are seen above 13,000 rupees per 10 grams at the end of the next two quarters as the world reacts to high inflation, financial turmoil and geo-political tensions by buying more of the yellow metal, a Reuters poll showed.

The median of a forecast by 14 banks and commodity brokerages showed the price at 13,500 rupees at the end of September and 13,400 rupees at the end of December.

The median of the average price of the metal in 2008 was at 12,598.5 rupees.

"Gold is being more of a safe haven," said Rajan Venkatesh, managing director, India Bullion, at ScotiaMocatta, one of the prominent sellers of precious metals in India.

"It is the U.S. economy, crisis in the financial market, the fact that the U.S. Federal Reserve is not giving enough confidence to the dollar and equities not doing well, that is making people buy gold."

On Thursday, the August gold futures on the Multi Commodity Exchange of India Ltd (MCX) was at 13,274 rupees, down 3.6 percent from an all-time high for futures on Tuesday.

But the current price is up 52 percent on year when seen on MCX's continuation chart.

The poll showed gold is not expected to remain steadily at higher levels.

"We expect some correction in gold as well as some appreciation in the rupee," said Harish Galipelli, head of research at Karvy Comtrade Ltd.

The rupee's value against the dollar, that determines local prices of the metal in a market where most precious metals are imported, may appreciate to up to 41.5 to a dollar, Galipelli added.

On Thursday, the rupee was at 42.82 to a dollar.

Two of the respondents saw gold above 15,000 rupees at the end of December, while two saw it a little above 11,000 rupees.

"Gold can fall by the year end assuming the U.S. could raise interest rates and we could see some recovery in equity and bonds which could lead to funds pulling out of commodities," said an analyst from IL&FS Investsmart Commodities Ltd.

The analyst said a likely correction in crude oil and falling demand from the jewellery sector were additional reasons supporting a fall in gold.

Gold has been the beneficiary of higher inflation in many countries on the back of crude oil as it is usually used as a hedge against it.

Credit defaults in the U.S. has also pushed funds away from stocks and money markets and into gold.

Geo-political tensions, particularly prospects of a conflict between Iran and Israel over the former's nuclear plans, have also kept the 'buy' calls on gold.