Gold prices: 200% jump in 5 Dhanteras! 20-25% return possible next year, says Axis Direct

Gold prices have jumped nearly 200 per cent over the past five years, from Dhanteras 2021 to the run-up ahead of Dhanteras 2026 and if one were to go by Axis Direct, gold may deliver returns of approximately 20-25 per cent by next Dhanteras, with target prices of Rs 1,65,000–Rs 1,71,000 per 10 grams.

Axis Direct noted that price of gold in the domestic market has surged from Rs 47,600 per 10 grams in November 2021 to approximately Rs 1,42,750 per 10 grams, translating into a phenomenal growth of 24.53 per cent, compounded annually.

Since last Dhanteras, gold has delivered a return of nearly 8 per cent, significantly outperforming Sensex and Nifty. That said, the yellow metal is trading at a discount of over 22 per cent from its peak of Rs 1,80,000, with domestic prices hovering around Rs 1,42,000 per 10 grams. 

Geopolitical tensions in the Middle East, a strong dollar and elevated Federal Reserve interest rates have weighed on prices, raising concerns about the sustainability of gold’s long-term bull trend. 

Historically, gold and the Dollar index shared an inverse relationship. The recent 4 per cent surge in the dollar index also weighed heavily on the yellow metal, reinforcing the trend that gold typically underperforms when the greenback and bond yields rise.

That said, consistent central bank buying and ETF Inflows are seen supporting the gold bull case.

"Current gold prices appear attractive for investors, having corrected more than 20 per cent from their peak. This presents long-term investors who missed the rally with a compelling opportunity to add gold in a staggered manner to their existing portfolios," it said.

Gold is internationally priced in US dollars, and India imports most of its gold requirements. Consequently, the exchange rate plays a crucial role in determining domestic gold prices. When the rupee depreciates, Indian importers need more rupees to purchase the same quantity of gold, even if international prices remain unchanged. This raises the landed cost of imported gold and supports domestic prices. Therefore, continued rupee weakness could cushion Indian gold prices against corrections in the international market, Axis Direct said.

Technically, Axis Direct said MCX Gold faced strong resistance near the Rs 1,60,000 level, which gradually turned into a supply zone as prices made repeated attempts to sustain above it over the past seven months. 

Additionally, a weekly close below the 20 EMA in September has weakened the bullish outlook.