They said that despite gold rates have overstretched, their bias would remain positive till the yellow metal price is above ₹55,500 levels on MCX. In short term, they expected that gold prices may go up to ₹57,500 levels. However, they advised gold investors to keep an eye on dollar index, which has strong support at 101 levels and any rebound in the greenback may lead to profit booking in the bullion asset.
Reasons for rally in gold prices today
Speaking on the triggers that is supporting gold allure among investors, market expert Sugandha Sachdeva said, “A relentless up move continued in gold prices as they scaled a new record high of ₹56,850 per 10 gm mark at the domestic markets, rising by around 0.54 per cent for the week.
A depressed dollar index hovering around a 7-month low continued to prop up gold prices, while softer-than-expected economic data from the US buttressed concerns that the economy is losing growth momentum and boosted gold’s allure as a safe haven.
Retail sales plummeted by the most in a year, manufacturing output witnessed the biggest decline in 2 years, and existing home sales dropped to a 12-year low last month.”
Sugandha went on to add that the US Fed officials have highlighted the need for raising interest rates further and keeping them at higher levels for longer even as inflation is cooling-off.
However, gold prices have been surging amid expectations of a slow pace of rate hikes by the US Fed this year. Markets are now pricing a 0.25 percentage point hike in borrowing rate at the next monetary policy meeting of the US central bank.
Dollar rates in focus
Advising investors to keep an eye on dollar index, Anuj Gupta, Vice President — Research at IIFL Securities said, “Dollar index nosediving to 7-month low and disappointing US economic data are the immediate reason for rally in gold prices.
But, one needs to keep an eye on the physical demand for the precious metal and dollar index. Physical demand in domestic market is expected to shot up due to upcoming wedding season, but major trigger would be dollar index. If it breaches its immediate support placed at 101 levels, then there can be some sharp upside movement in the yellow metal whereas in case of bounce back in dollar index, profit-booking may trigger among gold investors.”
Anuj Gupta of IIFL Securities said that spot gold price has immediate support placed at $1,885 whereas it is facing hurdle at $1,950 followed by $2,000 per ounce.
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Gold price outlook
On what next for gold investors, Sugandha Sachdeva said, “Even as gold prices look quite overstretched from a short-term perspective, as long as they are holding above ₹55,500 per 10 gm, the near-term bias remains positive. On the higher side prices can test ₹57,500 per 10 gm. On the contrary, the dollar index has key support at the 101 mark and any meaningful rebound in the greenback could alter the dynamics for gold and lead to profit-booking. Having said that, the near-term trend would still hinge on the Fed’s monetary policy action at the beginning of the next months.