Mixed views for India gold amid high oil, low dollar

By Ruchira Singh

MUMBAI (Reuters) - Indian analysts had mixed views on the direction of gold prices this week amid a weak dollar and record-high crude oil, but they agreed volatility would reign.

"I am seeing a bounce back of the dollar as technically it looks like it has bottomed out," said T. Gnanasekar, director at Commtrendz Research. "A portion of the investment that had left the dollar, may come back to it."

Gnanasekar said the dollar's rebound last week after Citigroup's earnings sparked hope that the credit crisis may be nearing an end, indicated it may rise, thus pushing down gold.

"There could be some short covering in the dollar which could strengthen as its decline is overdone," said Harish Galipelli, head of research at Karvy Comtrade Ltd.

Gold generally has an inverse relationship with the dollar as the two compete for investors' wealth. But it usually moves in tandem with crude oil as the latter causes inflation, while the metal douses it.

On the other hand gold could rise on hardening crude oil that was supported by worries of supply disruptions in Nigeria and comments by OPEC that it saw no need to raise production, analysts said.

"I think crude oil has the potential to go higher," said Somnath Dey, incharge of metal and energy research at Religare Commodities Ltd. "It may test $120 a barrel."

The dollar and crude oil, two of the biggest guides to gold, were seen dominating the metal this week with a thin economic calendar in the U.S. comprising mainly home sales data, analysts said.

"Gold will be volatile as there is very little economic data and speculation may therefore come in," said Dey of Religare.