Exclusive: Festive Season To Boost Gold Demand, Yellow Metal Price To Stabilize

Silver has suffered losses of almost 10% at both the Comex and MCX markets, while gold witnessed its lustre shrink by 8% on the Comex market and by about 5.5% on the domestic Indian market. The rise in the US dollar index which went up from $100 to $106 just in the past three months has exerted pressure on the prices of gold and silver.

The approaching festive period may offer some relief for the price of precious metals. Accordingly, it is anticipated that the price of precious metals will stabilise before the start of the festive season. Jateen Trivedi, Senior Research Analyst at LKP Securities, said in an interview with Goodreturns's Vipul Das that recent pressure on precious metal prices may have caused some concern, but the festive season brings with it the promise of stability and potential price appreciation. Here are the edited excerpts:

1. Prices of gold have fallen 8% in 4 months, while prices of silver have fallen 13% during the same period, what has led to the pressure on these precious metals?

A primary contributor to the recent pressure on gold and silver prices has been the surge in the US dollar index. In the last three months alone, the dollar index has climbed from $100 to $106. As the interest rate in the US is projected to stay higher for a longer period. This substantial strengthening of the US dollar has directly impacted precious metals.

In the Comex market, gold has seen its shine diminish by 8%, and in the domestic Indian market, it has experienced a decline of approximately 5.5%. The story is similar for silver, with losses of around 10% in both the Comex and MCX markets, primarily driven by the strength of the US dollar.

2. What is their near-term trajectory, do you see further fallout (specify levels)?

As for the near-term trajectory of these precious metals, volatility seems to be the name of the game. Gold prices are likely to fluctuate within a range of 54500 - 58500. Key resistance levels to watch are in the range of $1880-$1900 in the Comex market, while strong support can be found in the $1780-$1800 range. A further sell-off could occur if gold prices break below the crucial support level at $1780, a scenario that would likely materialize only if the US dollar surges above 107.50.

3. Can the festive demand usher some respite in prices of these precious metals, what is your outlook?

The upcoming festive season holds the potential to provide some respite for precious metal prices. Festive demand, often marked by increased purchases of gold and silver, is expected to lend support to domestic prices. Physical demand, as well as investments in ETFs, is likely to stabilize prices and prevent them from falling below the 55000 mark. On the upside, prices could test the 58000 level, provided the US dollar index doesn't surpass 107.50.

While the recent pressure on precious metal prices may have caused some concern, the festive season brings with it the promise of stability and potential price appreciation. With prudent investment strategies and an eye on the ever-shifting dynamics of the global economy, investors can position themselves to make the most of these opportunities in the world of precious metals.

4. How do precious metals look like ahead of the festive season?

The significant drop in precious metal prices ahead of the festive season presents an enticing opportunity for investors. Those who may have missed the previous rally now have a chance to seize the moment. This pullback is temporary in nature and is expected to stabilize. Gold, in particular, has a historical tendency to attract long-term physical buyers after experiencing a correction of 7-10% from its highs.

Investors are encouraged to consider various avenues, such as ETFs and jewellery, to capitalize on this favourable price band. Once the euphoria surrounding interest rates settles, it is anticipated that gold will stage a robust rally, potentially surging towards the $2000 mark.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.