Gold Prices: What Should Be Your Gold Strategy For Upcoming Festive Season?

The upcoming festive season comes around the time when the rupee is weaker against the dollar. In such a scenario, Jateen Trivedi, VP Research Analyst at LKP Securities suggests investors to capitalise on the positive trend in gold. He expects the upcoming festivals to maintain stability in gold prices. Hence, he believes the strategic entry point in gold ranges from 58500 and 57000 for a future price outlook of 61000 to 62000 by the end of 2023.

Trivedi said, "With the rupee showing signs of weakness against the dollar and the festive season in India just around the corner, investors should consider capitalizing on the positive trend in gold. The robust festive demand in India is poised to maintain stable gold prices. For investors seeking to accumulate gold, a strategic entry point lies between the current levels of 58500 and 57000."

Given the ongoing trend of global central banks acquiring gold and the uncertain global economic landscape, he highlighted that gold prices are anticipated to remain steady, if not rise significantly due to the impact of a stronger dollar and elevated interest rates. However, the trajectory could swiftly change. The moment the Federal Reserve hints at a potential pause in its rate hikes or even the possibility of an interest rate cut, gold prices are likely to surge.

Taking these factors into account, investors can reasonably project an optimistic outlook for gold, Trivedi said, "foreseeing price levels in the range of 61000 to 62000 by the close of the year. It's a strategic move that aligns with both the weakening rupee and the traditional buoyancy of the festive season in India."

On Wednesday, among metro cities, in Mumbai and Kolkata, the 22-carat and 24-carat in 10 grams rose by Rs 50 and Rs 60 each to Rs 54,200 and Rs 59,130 each respectively. Similarly, in Chennai, 22-carat gold price rose by Rs 50 to Rs 54,600 per 10 grams, while 24 carats picked up by Rs 60 to Rs 59,560 per 10 grams. While in Delhi, 22-carat and 24-carat gold prices remained unchanged to Rs 54,300 and RS 59,220.

Gold prices have made a significant jump since last year by nearly 14% in India, and silver prices zoomed by 21% owing to macroeconomic uncertainties like high inflation, recession fears, higher interest rates, and geopolitical tension among others.

Meanwhile, at the interbank forex market, the rupee clocked its best single-day gain in nearly one-and-half months against the US dollar as the greenback laid back from its recent peak levels and also rebound in global risk appetite helped lift sentiments. On Tuesday, the rupee finished at 82.9350 per U.S. dollar compared to its previous print of 83.1075.

Over the month rupee depreciated by 1.27% against the dollar and traded b/w 81.80-83.24, a Care Ratings report said. As per the rating agency, arrowing interest rate differentials and rising oil prices weighed on the rupee. FPIs continued to record net inflows albeit at a slower pace amidst rising UST yields. RBI interventions limited volatility.

Hence, CARE Ratings expect the Indian rupee to benefit from hawkish RBI, robust domestic growth and global risk-on sentiment. Healthy forex reserves will enable RBI to curb any volatility that may arise from volatile UST yields, oil prices and weak yuan.