Gold prices at Rs 54,000 or Rs 68,000? Where's the yellow metal headed this year

After a volatile 2022, gold prices have been hovering near record high late. Gold topped Rs 58,000 per 10-gram mark last week. The yellow metal saw some strong demand from China reopening and wedding season in India. Both the countries are largest consumers of the yellow metal.

Other than this, buying by the central banks, fear of economic recession, softening of US dollar, and geopolitical worries are likely to support the safe-haven asset class in the ongoing calendar. Market analysts are also positive on the yellow metal, which is considered a hedge against inflation. However, one must not expect any astounding 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 to accumulate gold in a staggered manner during the corrective phase.  He sees some consolidation in 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 to allocated 10-15 per cent in gold through the SIP route to balance their portfolio.

The recovery in the last three months in Gold prices can largely to attribute to a decline in the dollar index, softening of the bond yields and expectation 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 calendar, inflationary worries, the Russia-Ukraine war crisis and interest rate hikes weighed on the gold sentiments. The yellow metal prices were under the pressure after aggressive rate hikes by the central banks across the globe.

Rao from Kotak Securities said that until November 2020, gold was pressurized due to Fed’s aggressive interest rate hike stance to tame inflation. A higher interest rate environment is not good 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 the international markets, whereas MCX gold gained 14 per cent during the same period under review.

"The difference in gains between COMEX gold and MCX gold was mainly due to the appreciation in Rupee against the US Dollar between November 2022 to January 2023, said Rao from Kotak," 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 one 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 me test Rs 60,000-62,000 levels," said Kothari. "Instead of timing the markets, investors should consider SIPs in gold and stay invested for a long term."

Market analysts suggest that investors should consider Gold ETF and Sovereign Gold Bonds (SGB) over physical gold for long-term investment. In short term, futures can be a good trading bet, they say.

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