Gold price ₹4000 away from life-time high. Should you buy, sell or hold?

According to commodity market experts, the skeptical bulls stepped back leading to an unwinding of long trades which dragged down gold prices towards two-week lows. They said that slide in gold price was caused by soaring US treasury yield and hawkish US Fed on interest rate hike. However, it was Dollar index soaring up to record high of 101 that spoiled the party of bulls. But, they maintained that Russia-Ukraine war and global inflation concern would continue to provide support to gold demand and overall outlook for gold is still positive. They said $1870 levels is still a strong support for gold price and MCX gold rate may soon go up to ₹53,500 as market has already discounted much due to the reasons putting breaks on gold rush.

Speaking on the reason form slide in gold price last week; Sugandha Sachdeva, VP — Commodity & Currency Research at Religare Broking Ltd said, “The slide in gold price was a reaction to the soaring US 10-year treasury yields, underpinned by the deep hawkish tone of the Fed Chair. Speaking at an IMF event, he further indicated that 50bsp rate increases are on the table going forward to curb elevated inflation. Alongside, the soaring dollar index spoiled the party for the metal bulls, as it climbed to two-year highs, hitting the 101 mark. An upwards trend in US treasury yields and the greenback, along with the Fed’s hawkish tone on tightening policy didn’t bode well for gold. Besides, soft energy prices relieved some inflation concerns and weighed on gold as oil remained muted last week, whereas gas prices toppled down after surging to multi-year highs earlier in the week.”

However, she maintained that outlook for gold is still positive as geopolitical tension and global inflation would continue to dictate gold price in short term.

“On the geopolitical front, no sign of a ceasefire is still visible even as the Russia-Ukraine war enters its third month. As the Ukraine crisis worsens, there is a growing sense of nervousness that it will further disrupt supply chains and add to the already hot inflation, while also leading to the “risk-off” impulse. This will benefit gold for its status as a safe haven as well as a hedge against inflation. Moreover, lower prices are also likely to attract strong physical demand from India amid the ongoing wedding season, which shall further underpin prices,” Sugandha Sachdeva said.

Echoing with Sugandha Sachdeva of Religare Broking; Anuj Gupta, Vice President — Research at IIFL Securities said, “Gold price in spot market has discounted enough due to the reasons like soaring Dollar Index, US bond treasury yield, etc. But, reasons like Russia-Ukraine war, inflation, IMF trimming economic forecast and beginning of marriage season in India are expected to provide strong support to the precious yellow metal in short to medium term. Spot gold still has strong support at $1850 to $1870 per ounce levels and $1890 to $1900 can still be considered as strong demand zone for the precious metal.”

Anuj Gupta went on to add that MCX gold rates have strong support at ₹52,000 and ₹51,400 levels. Any dip below ₹52,000 should be seen as buying opportunity as ₹51,600 to ₹51,800 can be a good accumulation zone for gold investors.

Speaking on gold price outlook, Sugandha Sachdeva of Religare Broking said, “Gold prices are likely to maintain a positive bias where ₹51,000 per 10 gm ($1890-$1870 per ounce) would be the major near-term base to support prices. On the other hand, the psychological $2000 mark is likely to remain a key hurdle in the coming sessions, corresponding to ₹53,500 per 10 gm mark at the domestic bourses. As of now, we see prices hovering in a range only unless there is a convincing breach on either side.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.