According to commodity market experts, investors are parking money in the US dollar and the US bonds while moving out of the precious metal amid concerns that the central banks’ monetary tightening path and the lingering Russia-Ukraine war would cripple global economic growth. They said that dollar index has hit fresh two decades high and hence this trend is expected to continue in near term. In near term, spot gold rate may go up to $1780 per ounce whereas MCX gold rate may go up to ₹48,800 per 10 gm levels. They advised precious metal investors to wait for some time and buy gold at around key support levels of $1780 in spot market and ₹48,800 levels on MCX as broader outlook for gold is still positive.
Speaking on reasons for reasons for gold price correction, Sugandha Sachdeva, VP-Commodity & Currency Research at Religare Broking Ltd said, "In tandem with the risk-off sentiments seen in the broader financial markets, gold prices were also set for a losing streak, wherein they slipped by 2.86 per cent towards a three-month low, nursing their fourth straight week of losses. The key headwind behind the slide in gold prices was the impressive surge in the dollar index towards a fresh two-decade high. Investors preferred to park their funds in the safety of the US dollar and the US bonds while moving out of the precious metal amid concerns that the central banks’ monetary tightening path and the lingering Russia-Ukraine war would cripple global economic growth."
"As per the recent data, the consumer price index in the US eased a bit as compared to March but climbed more than the expectations with an annual rise of 8.3 per cent in April. As inflation stays stubbornly high, markets are pricing in another 50 bps rate hike at the US Fed's June meeting. However the significant depreciation in the Indian rupee, wherein it drifted to record lows of 77.63 mark during the week provided some cushion to the domestic gold prices," said Religare expert.
Echoing with Sugandha Sachdeva's views, Pritam Patnaik, Head of Commodities — HNI & NRI Acquisitions at Axis Securities said, "The precious metal seems to have developed a Teflon coating, where potentially every positive development or news seems to slip right off, making no impact on its traded prices. With the broader financial and geopolitical environment ripe for a haven option like gold, the flows have moved towards the dollar index. The dollar index touched its 20-year high on yesterday’s day of trade, pushing the gold prices towards a low of $1810 levels. Further, Fed chair Jerome Powell reaffirmed that the central bank is ready to raise interest rates by 50 bps in each of the next two policy meetings. Powell further pledged that the Fed was prepared to do more to curb soaring inflation."
The Axis Securities expert went on to add that the fundamental backdrop favors the USD bulls and suggests that the recent downward trajectory in gold prices might still be far from being over.
Speaking on gold price outlook, Sugandha Sachdeva of Religare Broking said, "As for the price outlook, the yellow metal has breached the key support of $1820 per ounce and is likely to drift lower towards the $1780 per ounce mark, while for the domestic markets, gold prices seem to head towards the key support of ₹48,800 per 10 gm. Even as prices are witnessing an intermittent phase of correction, we feel that the broad trend remains positive in gold as long as the level of ₹48,800 per 10 gm holds on a closing basis."
On her advise to positional gold investors Sugandha Sachdeva said, "For the near term, it is advisable to wait for some more declines and buy gold around the key level of ₹48,800 per 10 gm. On the higher side, we foresee a recovery in the precious metal towards ₹51,200 per 10 gm initially and then ₹51,800 per 10 gm in the coming days."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
