Why Gold Has Hit A 7-Week High? Will It Rally Further?

Gold prices continued to rally in the global markets, with Indian gold prices also gaining momentum in line with the global markets.

Says Navneet Damani, VP - Commodities Research, Motilal Oswal Financial Services, "Gold traded higher to a more than one-month peak as U.S. Treasury yields slipped despite better than expected U.S. economic data, pushing investors to bullion as a refuge against possible inflation ahead.

Concerns regarding inflation is increasing ahead of massive fiscal aids and ultra-low interest rates across the globe supporting the metal. Gold prices also got a boost after the U.S. government imposed a broad array of sanctions on Russia as punishment for alleged misdeeds, including interfering in the 2020 U.S. election. after a positive retail sales and weekly jobless claims market participants will keep an eye on housing data and inflationary expectation from the U.S. scheduled later in the day.

Broader range on COMEX could be between $1745- 1778 and on the domestic front prices could hover in the range of Rs 46,850- 47,450."

According to Nish Bhatt, Founder & CEO, Millwood Kane International - an investment consulting firm, the retail demand in India has been rising due to festive season buying has also provided support to gold prices. A pick-up in global economic activity will lead to subdued gold prices, but the risk of the second wave, uncertainty remains which may guide gold prices in the longer term.

"The rise in the number of COVID19 cases, fear of the next wave coupled with rising inflation in the US, lower yields, weak US Dollar, and the QE program by the US government has also provided strength to the gold prices. The current situation of rising cases threatens to derail the economic recovery in Q1, create uncertainties. The situation may lead to elevated gold prices in the short term till the situation stabilizes," says Bhatt.

According to analyst, gold prices could hold steady, given that bond yields could move higher, as economic momentum gathers steam. However, if the rupee weakens against the dollar, we might see gold prices in Indian cities once again gathering momentum.