Gold rates climb to 5-week high. Should you buy in this rally?


Gold rate today: It was another week of impressive gains for precious metal as prices climbed to five-week highs, rising by around 1.40 per cent at the domestic markets. Gold future contract for February 2023 ended at 53,393 per 10 gm levels, 853 higher from its last week close of 52,540 levels. Spot gold price closed at $1,797 per ounce, 2.45 per cent higher from its last week close price of $1,754 per ounce levels.

According to commodity market experts, ease in dollar index after US Fed dropping hint to moderate the pace of interest rate hike was the major reason for appreciation in yellow metal rates. They said that that gold price rally may continue further and it may go up to 54,500 levels on MCX whereas in spot market, they expected precious bullion metal to hit $1,840 per ounce in near term.

Speaking on the reason for rise in gold prices, Sugandha Sachdeva, Vice President — commodity & Currency Research at Religare Broking said, “The precious metal prices advanced higher as the US Fed Chair has hinted at moderating the pace of rate hikes going forward. Expectations are for a 50 bps rate hike at the Fed’s December meeting which has caused a downward spin in the dollar index towards a three-and-a-half-month low and prompted buying interest in the yellow metal.”

The Religare expert went on to add that among key economic data during the week, the US manufacturing activity swung to a contraction in November for the first time in two and a half years. However, the monthly jobs report has been quite upbeat where the US economy added 263,000 jobs in November as compared to expectations for a 200,000 jobs addition. The unemployment rate remained unchanged at 3.7 per cent, while the average hourly earnings rose by 0.6 per cent much more than expected, which is a major contributor to the price pressures in the economy. The tightness in the labor market has yet again raised concerns that the Fed will keep interest rates elevated for a long time in its attempt to curb inflation.

“The demand for gold has increased by 28 per cen this year, which reached 1181 tons by September 2022. Major gold purchases this year include the central banks of Turkey, Uzbekistan, India, and Qatar. The rupee has depreciated by about 10 percent against the dollar in 2022 due to a rise in interest rates, for which the RBI has bought gold to hedge. Gold prices have remained firm on the back of RBI buying this year apart from demand from jewelers in India,” Nirpendra Yadav, Senior Commodity Research Analyst, Swastika Investmart said.

Expecting gold and silver price rally to continue in near term, Nirpendra Yadav said, “Gold has support at 52,000 and resistance at 56,000 levels. Silver has support at 62,000 and resistance at 68,000 levels.”

Asked about gold price outlook in near term, Sugandha Sachdeva of Religare Broking said, “Momentum in gold price remains pretty strong where they are likely to head higher towards 54,500 per 10 gm and around $1,840 per ounce in the international markets. The yellow metal has managed to breach the key resistance of 53,200 per 10 gm mark and any dips towards the same can be utilized as a buying opportunity in the precious metal. However, eyes would now be on the OPEC+ meeting and the possibility of further production cuts by the oil cartel which can lead to significant volatility in crude prices in the coming days and also impact the direction of gold prices.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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