Gold price dips ₹2,300 from life-time high. Right time to buy?

According to commodity market experts, US Fed and most of the European central banks’ slightly ‘dovish’ stance on interest rate hike enticed demand for dollar, which triggered bounce back in the US dollar rates from the 10-month lows. This retreat in the US dollar worked as a taper on the gold price rally. However, they maintained that gold rates today enjoy strong support at $1,860 levels in international market. Experts said that the precious metal has strong support placed at ₹56,500 levels in domestic market and expected bounce back from this support towards 57,700 per 10 gm levels, expecting dip in demand for the US greenback.

On reasons for gold price witnessing pull back from life-time highs, market expert Sugandha Sachdeva said, “At the first policy meeting of the year, the US central bank raised rates on expected lines by 25 bps to the target range of 4.5 per cent to 4.75 per cent, while it acknowledged easing price pressures and maintained a slightly dovish stance. In tandem, the BOE and ECB also stuck to a largely dovish track, while increasing the borrowing costs by 50 bps, which enticed flows towards the US dollar and prompted a retreat from its ten-month lows.”

Sugandha went on to add that the US jobs report indicated a considerably robust labour market where the non-farm payrolls rose by 517,000 jobs in January much higher than the expectations of 185,000 job additions, while the unemployment rate slipped to 3.4 per cent.

“Average hourly earnings rose by 4.4 per cent (YoY) in January as compared to 4.9 per cent in December indicating softening wage inflation. Such impressive labour market figures further bolstered the dollar index and accelerated the slide in gold prices,” Sugandha Sachdeva said.

Echoing with Sugandha’s views, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, “A relatively small hike of 25 basis points by the US Fed took gold prices above ₹58,800 per 10 gram levels and silver prices to the tune of near ₹72,700 per kg on MCX. However, the US central bank’s uncertainty over the peak level of interest rates led to gains in the dollar index at the end of the week, which triggered profit booking in precious metals. The slow growth rate of the US economy may force the US Fed to stop raising interest rates and reduce them until the middle of this year.”

Gold price outlook

Nripendra Yadav further maintained that the global economy is under pressure due to frequent interest rate hikes by central banks, and this is expected to fuel gold price rally after the recent correction.

Speaking on gold price out look, Sugandha Sachdeva said, “There is strong support in sight at ₹56,500 per 10gm and $1860 per ounce mark which might lead to a retreat in prices towards Rs.57700 per 10gm. However, any convincing break of ₹56,500 per 10 gm mark and $1,860 per ounce mark can push prices further on the downward incline towards ₹55,500 per 10 gm and $1,820 per ounce mark in the coming days. Markets would look forward to the commentary from various Fed officials next week to figure out whether the US central bank will stop its tightening path after March.”

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.