Gold prices have shot up nearly 8% this year-to-date and the yellow metal has outperformed all other asset classes. As the prices remain elevated, investors must wait for some correction in yellow metal before resuming a buy. While the jury is still out on whether the Federal Reserve will increase interest rates or do a pause, gold prices may likely recede in the event of a hike, making it a value buy.
“Any correction between 3% and 5% in domestic gold prices is a good opportunity for buying,” Saumil Gandhi, Senior Analyst (Commodities) at HDFC Securities told ETMarkets. In the domestic market, gold has given an average return of 13% in the last five years, he added.
Amid the current banking crisis in the US, it is still unclear if the Fed will bite the bullet and increase interest rates on Wednesday, but a hawkish commentary and rate hike could lead to near term softening in the price.
Meanwhile, Jateen Trivedi, Vice President, Research Analyst at LKP Securities also sees some softening in the rates, going ahead. “A higher hike than 25 bps with hawkish speech shall bring Comex Gold back to $1,940 odd levels and Rs 57,000 in MCX, which shall again act as buying bets,” Trivedi said.
On the flip side, a 25 bps or lower rate hike along with non visible or hawkish speech will be strongly positive for Gold and levels of $2040-2050 in Comex and Rs 61,500 on MCX will be seen in coming days, he added.
“When there is market uncertainty, gold tends to rise. Yet, with the current banking crisis scenario easing, gold prices may retrace with the US Fed‘s rate hike decision on the horizon,” Prathamesh Mallya, Assistant Vice President – Research, Non-Agri Commodities, and Currencies at Angel One said estimating retracement.
“We expect further potential upside and maintain our bullish outlook for gold,” HDFC Securities’ Gandhi said while advising a buy on dips strategy instead of taking positions at current highs.
“Gold is in an uptrend and medium-term Comex gold prices could retest all-time highs around $2,070. By the end of the year, we expect Comex gold price should rally towards $2140 per ounce. In the domestic market, we expect gold prices to rally above Rs 65,000 level in the medium term,” Gandhi emphasised.
The daily average range is at its highest level since April 2022 and the trend is likely to continue for another quarter, Gandhi said. His advice to investors is to buy in a staggered manner instead of going at one shot.
He said that the US Fed has little room to alter its policy and it will be very difficult for the Central Bank to choose between taming inflation by increasing interest rate and financial stability.
Gold will benefit from the higher inflation scenario as well as dovish commentary, he opined.
Options in Gold
Investors have plenty of options to invest in gold instruments in the form of Sovereign Gold Bond, ETFs and mutual funds.
Return on ETFs and mutual funds are similar to those in gold futures, Gandhi said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)