For gold and silver, January was a good start to the year. After seeing sharp corrections and volatility during the last months in 2011, gold and silver made good recovery in January.

Gold prices stood at $1,521 per troy ounce in December 29, $1,561 on January 2 and have moved up to a recent high of $1,763 in the first week of February. Silver too rose from $27.64 per ounce on January 2 to $34.11 by the end of the month.

The main factors that led to the recovery in bullion prices were the slight weakening of the US dollar and strengthening of the euro. The dollar index moved down from 82 levels to 79 during the month.

“Some positive news on economic data and retail sales from Japan amid general deflation have seen increased buying of the yen, thus, putting the dollar under pressure. The euro too gained against the dollar due to the same reason,” said Murukesh Ku-mar, senior research analyst, commodities, JRG Wealth Management.

Back home, the rupee too strengthened from $52 levels at the end of December to $48.90 in January.

The weaker rupee has been cushioning gold pr-ices during the tail end of 2011 from sharp corrections. In January, domestic gold prices did not make much recovery mainly due to the rupee factor.

Gold prices moved within the range of Rs 26,517 and Rs 28,194 per 10 gm during the month. Meanwhile, Indian stock markets made good gains as foreign institutional investors (FIIs) and other overseas funds became active in the bourses.

This also shifted dom-estic investor interest from the bullion.

However, on February 4, jobs data released by the US strengthened the dollar, leading to correction in gold. The US economy reportedly added 243,000 jobs in January. Event

ually, the rate of unemployment in the country fell to 8.3 per cent, the lowest since February 2009. Reacting to this data, gold fell from $1,763 to $1,735 an ounce on February 4 after a good January.

Nevertheless, industry watchers are optimistic about bullion prices. “The US central bank has decided to keep its key interest rates at near zero levels till 2014 and this will be a bad news for investors who have been planning to park their funds in dollars. Hist-orically, we have seen that US interest rates have an inverse correlation with gold prices and such a situation could help gold investments,” said Kumar.

The big investment funds, which had partially exited from the bullion in 2011, may also come back if prices continue to appreciate 10 to 20 per cent. “Usually, June-July sees seasonal investments in gold and this could take prices up once again. In addition, the July-Sep-tember period has been seeing 10 to 15 per cent rise in prices over the past 10 years,” he said.

Though January need not essentially be an indicative month for the price movement in metals for the year, Kumar ex-pects gold prices to touch a high of $2,250 an ounce in the latter part of the year. zz

sangeethag@mydigitalfc.com