Spot gold prices were hovering at $1,595 per ounce at 12.30pm UAE time (8.30am GMT) on Monday as the yellow metal seems to have rediscovered its ‘safe haven’ status over the weekend. Gold has now gained about $70 over last Wednesday’s intra-day low of $1,527.70 an ounce, and traded near the $1,600/oz level earlier this morning, around 9am UAE time. The yellow metal has seen a surprise turnaround over the past few sessions, rising on the back of a recovery in the euro, with shorts covering amid expectations prices could rise even further. But does it really signal a turnaround in the short-term direction of the metal, or is it just a relief rally? Let’s have a look at the fundamentals that drove the gold price down about 20 per cent from the record peak of $1,920 per ounce registered in September 2011. First and foremost, it rose too high, too fast. In the nine-week period between July 1 and September 6, 2011, gold prices shot up by 30 per cent, from $1,478/oz on July 1 to $1,920 on September 6, 2011. That’s not the hallmark of a sustainable, ‘safe haven’ investment – and it was proved so when prices slumped more than $360/oz to $1,557/oz by the end of 2012. Second, gold prospects were dampened when India, the world’s largest gold consumer, decided to add an import tax on gold and a new tax on jewellery earlier this year in a bid to reduce gold imports and contain the country’s ballooning fiscal deficit. That, combined with a weakening rupee, meant that gold became “very expensive” for Indian consumers. Visibly, Indian demand for gold slumped, with latest World Gold Council data showing that Indian consumption dropped 29 per cent to 207.6 million tonnes in the first quarter of 2012 compared with the same period in 2011. As any business worth its salt will tell you, you’re not going to get too far if you lose your biggest customer – unless, of course, you rope in another one. Last I checked, there was no one other market near generating enough additional demand in one full year to compensate for just one quarter’s loss for Indian gold demand. In addition, unless there is a clearer message emanating from the US Federal Reserve on the continuation of its quantitative easing programme, gold will at best remain volatile, with investors trying to read between the lines of Ben Bernanke’s ‘clever’ speeches.