Gold Steadies As Fed Decision Awaited; Goldman Sachs Raises 1-Year Target To $2300/oz

Gold prices in India were a tad lower by 0.13% or Rs. 67 at Rs. 52524 per 10 gm as is the trend overseas. But as the trading progressed, on the MCX gold scaled a new high of Rs. 52750 per 10 gm. Silver on the other hand rallied by 0.22% or Rs. 146 to Rs. 65150 per kg.

Gold Prices In International Market

Gold prices in the international market today steadied on rising corona worries as well as hopes of inflationary pressure due to additional stimulus. Spot gold was at $1957.84 per ounce.

In the international markets, gold prices on July 28, 2020 hit a record high of $1980.57 per ounce before heading lower as dollar recovered somewhat from losses.

Gold is seen as a hedge against a weakening dollar.

Outlook for gold in near term of 3 months

Pricing in different positive factors such as the declining dollar, geo-political tensions which are now again worsening on the India-China border apart from the US-China conundrum and falling real rates in the economy, there could be a trigger for demand in gold. In the next 3-months, gold prices are seen between $2,040-$2,170.

For a 12-month forecast; Goldman Sachs raises its price target to $2300/oz

Gold prices in a one-year period are set to hit a high of $2700 as seen by the global investment bank Goldman Sachs. On Tuesday, the entity raised its 1-year target price for gold given the safe haven appeal as also there are hopes around further decline in real interest rate in the US economy. The surge in gold prices is being driven by a potential shift in the U.S. Fed towards an inflationary bias to account for political tensions and expectations that coronavirus infections will rise, Goldman said.

Caution advised for investors in gold

Though demand for physical gold has waned given the record high prices, what keeps the momentum is the huge inflow via the ETF route. While the momentum is still positive, we recommend some caution in buying aggressively at current levels, as there is a good possibility of some position squaring around Fed decision, advised Ravindra Rao, VP-Head Commodity Research at Kotak Securities.

Outlook in Silver Price

Silver too has been rallying on positive sentiment in gold as there might be some buying shifted to silver which is cheaper and shares a positive correlation with gold. In the global market, alike gold, silver too hit a record high price of $26.225, the highest since April 2013. The surge in precious metal prices is primarily triggered on account of weakness in dollar as well as hopes around additional stimulus to flight the pandemic.

Unless there is seen correction in gold price, silver too would rally, but a cessation in flow in Silver ETFs require caution on aggressive buying in the white metal.

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