Thursday, November 30, 2023

gold prices: Gold prices hit speed-breaker ahead of Dhanteras after Rs 3,900 uptick. Should you buy at current levels?

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Gold price rally of 7% or Rs 3,900 per 10 gram over the last one month has met a speed breaker amid a falling risk premium on Israel-Hamas war and latest assertions by Federal Reserve Bank of Minneapolis President Neel Kashkari saying that the US Central Bank will have to do more work to control inflation.The two events have taken some sheen out of gold as the yellow metal has fallen by more than Rs 400 on MCX in the last two sessions.

With Dhanteras just three days away, the correction could not have come at a more opportune time for gold lovers who can utilise the dips to do some festive buying or add it to their portfolios.Experts, ETMarkets spoke to are suggesting a dip buying in gold and silver, expecting a range bound movement between Rs 60,000 and Rs 61,000 over the next 3-4 days.

Gold’s declines can mainly be attributed to rising bond yields and a decrease in the war-risk premium, Neha Qureshi, Senior Technical & Derivative Analyst, Anand Rathi Commodities & Currencies said, adding that it briefly surged above $2,000 per ounce due to expectations of Federal Reserve rate cuts, but has since been declining.

Anuj Gupta, Head Commodity & Currency, HDFC Securities sees a range bound movement in gold with a maximum upside up to Rs 61,000 in and around Dhanteras. His advice to investors is to buy on declines at levels near Rs 60,000.

From a near 4% or Rs 2,200 month-on-month fall in gold prices in September on the back of higher bond yields and strong dollar index in September, its haven appeal returned in October as the Israel-Hamas conflict unfolded. The festive fervour and correction in prices of gold and silver gave a fresh impetus to gold buyers as the rally returned. As second-largest consumer of gold, India witnessed a 10% jump in gold demand to 210.2 tonnes during the July-September quarter aided by softening of gold prices and festivities.

A PTI report said that the demand for jewellery rose 7% in the quarter under review to 155.7 tonnes from 146.2 tonnes, while that of bar and coin demand increased by 20% to 54.5 tonnes from 45.4 tonnes.

The investments in bar and coin in India reached the highest for a third quarter since 2015, the report said further.

Even the elevated prices could not dent the demand as people shopped for lower-carat (18 and 14 carat) jewellery, benefitting retailers owing to higher-margins in them, the report noted.

As a result, India’s gold imports rose to 220 tonnes in Q3CY23 from 184.5 tonnes in the year-ago period.

Gold has been the most shining commodity in 2023 among all top traded commodities on the MCX with returns of more than 20% in 2023, Naveen Mathur, Director-Commodities & Currencies at Anand Rathi Shares told ETMarkets.

With Dhanteras and Diwali less than a week away, its appeal has increased beyond investment and jewellery, he remarked.

“Yellow metal is woven into India’s cultural history and is revered by a population of over 1.4 billion. Indian gold demand typically peaks between October and December on the back of Diwali, followed by the wedding season,” Mathur said.

The Anand Rathi analyst sees the overall retail demand likely taking a hit this time around compared to last year on the current rally. His advice to prospective buyers is to still buy gold given the price environment for bullion remaining strong amid geopolitical concerns and slowdown in the US economy. He does not rule out near term corrections.

Gold buyers with an investment perspective can use it as a hedge in market turmoils and during periods of volatility, Naveen KR, Smallcase Manager and Senior Director at Windmill Capital said as he emphasised on the need for bullion allocation in one’s portfolio for capital protection and sustainable wealth creation.

Smallcase, which operates ‘The Equity & Gold’ fund, has a 70% allocation in Nifty Bees and 30% in Gold Bees, he informed.

Gold has not disappointed either the bulls or the bears giving them better bargain levels for their investments, Manav Modi, Commodity Research Analyst at Motilal Oswal Financial Services said.

“Significant fundamental shifts including central bank policies, geopolitical unpredictability, arguments over a hard or soft landing, increased interest in purchasing riskier assets and volatility in the dollar index and yields have influenced swings in gold and silver prices this year,” he opined.

In his view, these issues are likely to linger for long and will keep the party going for gold bulls. A buy on dips strategy is suggested by him for silver as well.

Investors have a pool of options to choose from viz. bullion in physical form, via ETFs, MCX and Sovereign Gold Bond (SGB) for investors with a very long investment horizon.

“With its еnduring rеputation as a havеn assеt, gold offеrs a compelling option for investors sееking long-tеrm wealth prеsеrvation and divеrsification. Its historical rеsiliеncе against markеt fluctuations instills confidеncе in its ability to wеathеr еconomic storms,” Agam Gupta, Executive Director at Share India Fincap said.

On thе othеr hand, silver presents a morе dynamic investment proposition oftеn exhibiting grеatеr pricе volatility comparеd to gold, he pointed out. This inhеrеnt volatility, whilе potеntially amplifying rеturns, also еlеvatеs thе associatеd risk profilе, he warns.

“Regardless of the chosеn investment vеhiclе, gold rеmains a timеlеss assеt with a rich history of valuе prеsеrvation,” Amit Khare, Associate Vice President at GCL Broking said, recommending investors to carefully evaluate their financial goals and risk profile while buying bullion on Dhantеras.

On gold’s demand outlook, PTI quoted WGC India Regional CEO Somasundaram PR saying that the full-year 2023 gold demand would be in the range of 700-750 tonnes, which will be marginally lower than 774 tonnes demand in 2022. The demand for the first nine months stood at 481.2 tonnes, he added.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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