Expect upward target of Rs 81,000 for gold in domestic market: Motilal Oswal Financial Services

Motilal Oswal Financial Services has maintained a positive bias for gold and has revised upward potential target to Rs 81,000 in the domestic market. It recommends "buy on dips" approach for gold, with advice to accumulate near Rs 69,000. While on COMEX, MOFSL advise accumulating around $2250 for targets towards $2650.

On May 29, gold prices on the MCX were at Rs 72,155 per 10 grams on Wednesday. In the international market, gold prices were around $2,359 per ounce. This indicates a certain level of stability in the gold market.

In its latest report, Motilal Oswal said that gold started the year steadily, but bullish momentum has picked up significantly, posting gains of around 14% year-to-date in the domestic market. It highlighted the astounding growth registered by silver this year, having already gained upward mobility of 27% returns year-to-date in 2024.

“Geopolitical tensions have added to the risk premium for gold as concerns about debt pose long-term challenges to overall growth. The economic indicators from the US continue to show strength in the economy. Additionally, along with central bank buying, festive and wedding-related domestic demand could boost sentiment. It says that although ETF buying is struggling, investment and central bank buying are maintaining strong demand momentum,” said Navneet Damani, Group Senior VP – Commodity Research at Motilal Oswal Financial Services.

Geopolitical tensions persist, driving safe-haven purchases amid Israel's escalating assault on Rafah. Reports of North Korea launching missiles at Japan have further raised market risk. Federal Reserve officials are vocal about future monetary policy directions. They emphasized the need for additional evidence of decreasing inflation before contemplating rate reductions.

Manav Modi, Analyst, Commodity and Currency, MOFSL, said, "Gold prices steadied in Asian trade, seeing some relief from a mildly weaker dollar as traders braced for comments from Fed officials and important economic data releases this week. For the second straight day, Silver witnessed a sharp rally, marking an all-time high on the domestic front."

Global gold demand rose by 3% year-on-year to 1,238 metric tons in the first quarter of calendar year 2024, marking the strongest first quarter since 2016, due to active over-the-counter (OTC) trading, the World Gold Council (WGC) said last month.

Gold prices have almost tripled in the last 9 years, starting from Rs 24,740 in 2015. This trend mirrors the previous 9-year cycle, where prices tripled from Rs 8,250 in 2006. Looking back, it took about 19 years for gold prices to triple from Rs 2,570 per 10 g in 1987, with shorter cycles of 8 and 6 years.

Gold is commonly considered a powerful investment tool to guard against inflation. Its value tends to remain stable or rise during inflationary periods. Historical evidence demonstrates that global events like political tensions and economic downturns can greatly impact gold prices, causing rapid surges in short timeframes.