Gold rates continue to rally on rising Covid-19 cases. Good time to buy?

According to commodity market experts, gold prices are rising due to renewed Covid fear and ease in dollar index. They said that fear of global economic recession has also eased after expansion in the US economy. However, they maintained that volume in gold prices are expected to remain muted and hence yellow metal prices are expected to remain ‘sideways to positive’ in near term. They said that spot gold price may remain range-bound in $1,780 to $1,820 zone whereas in domestic market, gold rates are expected to trade in ₹54,000 to ₹55,000 zone. Experts advised investors to maintain ‘buy on dips’ strategy for short term and asked traders to avoid taking short position in gold as the precious metal may emerge an ‘investor’s haven’ if Covid cases continue to rise in near term.

Speaking on reasons for rise in gold prices, market expert Sugandha Sachdeva said, “Subdued move in the dollar index wherein it is trading close to six-month lows remained a key tailwind for the precious metal. Another major trigger that ignited gold’s safe-haven demand is the spike in Covid cases globally, which has accentuated worries about an economic slowdown.”

Sugandha Sachdeva went on to add that the US economy expanded at an annual pace of 3.2 per cent during the third quarter, better than the previously expected 2.9 percent rate, while fuelling concerns that the US central bank will keep pushing interest rates higher for longer in its battle against inflation. The Fed’s preferred inflation measure-PCE price index rose by 0.1 per cent in November as compared to 0.4 per cent in October, indicating a cool-off in inflationary pressures but not enough to dissuade the US Fed from hiking rates. Major central banks already struck a relatively hawkish tone last week.

Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, “Easing inflation and the US Federal Reserve’s slower pace of interest rate hikes supported precious metals at the end of 2022. The sharp depreciation of emerging market currencies drew investors to gold and silver,” adding, “Tighter monetary policy by the Bank of Japan, the European Central Bank, and the US Fed, raised uncertainty over the possibility of damage to global growth. If the interest rates continue to rise next year as well, the global economy may suffer due to which the haven demand is expected to remain in 2023.”

Rising Covid-19 cases

“Rising COVID-19 cases in China have once again raised concerns for the world, which has pushed the precious metals closer to their all-time high levels in the domestic market. However, improving US economic data and easing of Covid-19 restrictions in China limited the precious metal’s gains despite a steady rate hike,” said Swastika Investmart expert.

Gold price outlook

Advising ‘buy on dips’ strategy to gold investors, Anuj Gupta, Vice President — Research at IIFL Securities said, “Gold rates are expected to remain sideways with positive bias. MCX gold price is expected to remain in ₹54,000 to ₹55,000 per 10 gm range whereas spot gold price may remain in $1,780 to $1,820 per ounce in near term. So, investors are advised to buy around ₹54,100 to ₹54,200 zone maintaining stop loss at ₹53,700 levels and book profit at around ₹54,800 to ₹55,000 zone. In spot market, investors are advised to take buy position at around $1,785 to $1,790 levels and book profit at around $1,815 to $1,820 per ounce zone.” However, Anuj Gupta strictly advised gold traders from taking any short position as precious metal may become an investor’s haven if Covid cases continue to rise in near term.

“As for the outlook ahead, volumes are likely to stay muted in the final week of 2022 where the focus will be on the goods trade balance, retail inventories, and pending home sales data from the US. In the international markets, prices need to sustain above the crucial $1,825 per ounce mark, and only a break past the same would entail further upside in prices towards $1,850 per ounce and then $1,880 per ounce,” said Sugandha Sachdeva.

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.