Gold Seen Higher as Financial Turmoil Rages

MUMBAI: Gold prices are likely to rise this week as nervousness in the US financial markets after Lehman Brothers' filing for bankruptcy is likely to spark more safe-haven buying in the yellow metal, analysts said.

Analysts said the commodity, which last week touched a 11-month low, may remain firm despite softer crude oil as the magnitude of the economic worries outweighed oil.

"Bargain hunting, financial market turmoil and the dollar's weakness will support gold," said T Gnanasekar, director of Commtrendz Research. "There are clear indications that the crisis is here to stay for long."

Gold generally moves in tandem with crude oil as the latter signals inflation, while the metal negates it. But the metal has an inverse relation with the dollar as the two compete for funds.

The dollar was down 2.6 per cent against the yen - the biggest one day percentage fall since early 2002. The US Federal Open Market Committee's statement in its interest rate setting meeting on Tuesday would be watched for gold's next direction though a cut is not expected, analysts said.

"Fed's decision and the statements thereafter would be the key to the immediate trend in bullion," said Pradeep Unni, senior research analyst at Richcomm Global Services DMCC.