After a year of significant volatility, gold prices have recently been hovering near record highs. The yellow metal reached Rs 58,000 per 10-gram mark last week due to strong demand from China reopening and the wedding season in India. Both countries are the largest consumers of the yellow metal.
In addition to this, buying by central banks, fear of an economic recession, softening of the US dollar, and geopolitical concerns are likely to support the safe-haven asset class throughout the year. Market analysts are positive about the yellow metal, which is considered a hedge against inflation. However, investors should not expect any significant rally in the bullion.
Ajit Mishra, VP – Technical Research, expects the yellow metal to hit Rs 62,600 and Rs 68,150 levels in the medium to long term and suggests accumulating gold in a staggered manner during the corrective phase. He sees some consolidation in the near future with support at Rs 56,200-56,600, whereas profit booking is in the range of Rs 58,100-58,700.
Ravindra V Rao, VP-Head Commodity Research, Kotak Securities, expects gold to trade between Rs 54,500-Rs 60,000 in the medium term and suggests investors allocate 10-15 per cent in gold through the SIP route to balance their portfolio.
The recovery in Gold prices over the last three months can largely be attributed to a decline in the dollar index, softening of bond yields, and expectations of a dovish stance from the US Fed in the coming months, said Mishra from Religare Broking.
“Improvement in the demand outlook combined with buying by central banks further supported the rise. The pace of decline is slightly higher on the international front after the upbeat US Job report and recovery in the dollar index,” he said.
In the previous year, inflationary worries, the Russia-Ukraine war crisis, and interest rate hikes weighed on the gold sentiments. The yellow metal prices were under pressure after aggressive rate hikes by central banks worldwide.
Rao from Kotak Securities said that until November 2020, gold was under pressure due to Fed’s aggressive interest rate hike stance to tame inflation. A higher interest rate environment is not suitable for non-yielding bullion, and COMEX gold had reached multi-year lows.
Between November 2022 and January 2023, gold prices appreciated about 19 per cent in international markets, whereas MCX gold gained 14 per cent during the same period.
“The difference in gains between COMEX gold and MCX gold was mainly due to the appreciation of the Rupee against the US Dollar between November 2022 to January 2023,” said Rao.
According to market experts, geopolitical concerns, the dovish tone of the US Federal Reserve in 2023, global growth concerns, recession fears, and central bank buying are among the key factors that may push gold prices across the globe.
Prithviraj Kothari, Managing Director of RiddhiSiddhi Bullions (RSBL), said that gold prices have jumped up to 20 per cent in the last quarter, which is a steep rise for a safe asset class. He expects some correction in the near term, which might benefit long-term investors.
“Physical buyers have remained sidelined in this uptrend, so domestic demand is weak, but in 2023, gold may test Rs 60,000-62,000 levels,” said Kothari. “Instead of timing the markets, investors should consider SIPs in gold and stay invested for the long term.”
