Gold Price Outlook: 7 Key Factors That Influence Prices Of 24K, 22K, 18K Yellow Metal In Long-Term

Gold prices continued to extend its rally, hitting record high at MCX. This comes at a time, when the share of gold reserves in India's forex reserves climbed a whopping 211% under the governor Shaktikanta Das reign of RBI. The latest price surge comes amidst decline in treasury yields and positive global market. Brokerage Nirmal Bang in its technical outlook expects gold prices to continue to surge.

MCX Gold Prices On October 17:

MCX gold futures with December 5, 2024, expiry surged by Rs 117 or 0.15 to trade at Rs 76,781 per 10 grams. The benchmark touched an all-time high of Rs 76,861 in the early trade, slightly shy of Rs 77,000 mark.

In its technical outlook, Nirmal Bang said, "Gold prices are expected to rise. One can buy at 76500 with a stop loss of 76200 for the target at 76800-77000."

Meanwhile, spot gold aka XAU/USD jumped near its record high of $2,685.96 per ounce, by hitting an intraday high of $2,684.91 per ounce. Currently, price is up by 0.33% to $2,682.91 per ounce.

Also, US gold futures surged to hit an intraday high of $2,700.50 an ounce, which is near its all-time high of $2,701.95 an ounce in the early hours of Thursday, Currently, the price is at $2,697.20 an ounce, up by 0.21%.

Currently, rising tensions in Middle East and drop in yields are fueling upside in gold. Gains in dollar however limits the rally. But nonetheless, the outlook for yellow metal is bullish.

In India, there are 8 factors that could influence prices of 24K, 22K, and 18K and gives a brief idea of how to invest. As per Nirmal Bang's website, these 8 generic factors are:

1. Demand and supply: Demand and supply is one of the biggest factors, if not the biggest, that determine the price of any commodity. So is the case with gold. It is a hard commodity, means it is mined. The amount of gold that is mined every year, is not sufficient. This means an increase in the demand for gold inevitably results in an increase in the prices of gold.

2. Inflation: As discussed already, gold is a popular and effective hedge against inflation. In the event of an increase in inflation rates, even though the value of currency decreases, it does not affect gold. Therefore, in case inflation rates rise, investors choose to invest in gold. Due to this, the demand for gold increases which may affect the price of gold.

3. Interest rates: Interest rates affect gold prices in an interesting way. When interest rates increase, investors tend to sell their gold or gold funds and invest in deposits to enjoy the benefits of high interest rates. This means the demand for gold decreases which in turn means a drop in the price of gold. Contrary to this, when interest rates fall, investors tend to avoid deposits and rather invest in gold. In this scenario the demand for gold increases followed by an increase in the price of gold. Thus, it can be stated that the price of gold changes inversely with relation to interest rates.

4. Jewellery market: In Indian-style ornaments and jewellery, gold is very commonly used and is held in high esteem. When the interest in gold jewellery increases in the Indian jewellery market, especially in festive and wedding seasons, it results in an increased price of gold.

5. Government gold reserves: The Government of India holds and operates gold reserves. The government can purchase or sell gold through the Reserve Bank of India. These activities influence the price of gold within the country as when the government purchases gold, the supply of gold in the market decreases and cash is injected into the market. This makes the price of gold go downwards.

6. Import: The amount of import is also a deciding factor in gold prices within the country. India is the second largest consumer of precious metals, therefore it needs to import gold in order to meet the demands. When the import duty is improved, the price of gold decreases as the availability of gold increases.

7. Performance of other markets: The performance of other markets such as the equity market and the currency market also plays an important role. During a negative price movement in those markets, investors may choose to invest in gold. As it increases the demand, the price of gold may increase with it.

Disclaimer:

The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the article mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.