In the current scenario, buoyed by market sentiments world over and the recent custom duty hike announced in the Union Budget on the precious yellow-metal to 12.5% from the previous 10% even when the stakeholders were demanding a cut back in its rate, has made the metal surge to record highs in India. Even internationally, gold hit a 6-year high in dollar terms only recently.
How far will gold price rise to?
Analysts in light of the market paradigm, given a couple of factors including the below listed which weigh to a considerable extent on gold, expect the metal to continue its surge with a mild correction which should be seen as a buying opportunity.
1. Concerns over a global economic slowdown
2. US-Iran tensions
3. The US-China trade war situation on which marketmen is betting as to when will the talk between the two nations commence again. Early during the week, Donald Trump, the US President, threatened to impose a tariff on another $325 billion of Chinese goods.
4. Strong bet on interest rate cut by major global banks going ahead (dovish monetary policy stance) including the US Federal Reserve in the upcoming meet, in view of the global slowdown situation and a weaker than expected data on US housing. While most hold the view that rate cut to the tune of 25 basis points will be affected, some opinion also come of an up to 50 basis point rate cut. 1 basis point or 1bps is one-hundredth of a percentage point.
Interest rate lowering augurs well for gold as it is during this time that the non-interest bearing instruments gain traction due to increased demand
Gold price expected to reach Rs. 36000 levels by 2019 end and Rs. 40000 by 2020
Given the bullish sentiment, which in a 10-year period has provided returns of almost 9% in rupee terms, analysts in the domain expect the metal to surge to Rs. 36000 in price by 2019 end as the dollar continues to weaken amid growth concerns and geo-political tensions are further adding to the appeal of the metal as a safe-haven investment.
It is to be noted that gold already has inched to levels very close to Rs. 36,000 i.e. in the first week of July this year, it already scaled to Rs. 35,800, just fee 100 rupees from the level discussed here in the story.
Mild correction in gold prices foreseen:
"The general market expectation is that the US Fed may slash rates by 50 bps in its upcoming July meeting, but I doubt it; so there could be some profit booking at that time. Profit booking can also come due to some announcement at the G-20 meeting, which the market perceives as conciliatory," says Praveen Singh, AVP, Fundamental Research-Commodities, Sharekhan Comtrade. Since the dollar is the main driving factor, US non-farm payroll data is another event worth watching. A strong data will strengthen the dollar and trigger profit booking in gold. However, experts say that investors should use such corrections to buy more gold. "Treat the upcoming weakness as a mild correction before the next up-move and not as a turnaround," says Harish, Head of Commodities Research, Geojit Financial Services.
Gold rates today:
In India, being near record high price, price of gold has been held almost steady. With price of 22K and 24K gold climbing higher by Rs. 100 each, to Rs. 34,000 and Rs. 35,000 per 10 gm, respectively. Also, gold futures contract for delivery in August were trading high at Rs. 35,094, after a previous record high of Rs. 35,145 attained last week.