MUMBAI: Bullion prices continued to sizzle for the third day, on the back of the global rally that has gained an unprecedented speed since the US Fed cut the interest by 50 bps for the first time in four years. Analysts expect the rally to continue for some more time—ranging from $2,800-3,000/ounce or Rs 7,550-8,000 by December. The metal has already gained 29 percent this year after a 20 percent rally in the previous year.
The yellow metal continued to gain Friday adding Rs 35/g and taking the retail price to Rs 7,575/g for pure gold. Similarly, silver also shot up by Rs 1705/kg to Rs 92,522, according to the closing price details on the Indian Bullion & Jewellers Association website.
Since the rate cut hope gained traction, gold has been on song in the global markets, already reaching the year-end target of $2700/ounce. After crossing the sensitive price barrier, the metal traded on Friday at $2691/ounce.
In a note Friday, a day after the metal crossed the $2700/ounce mark on the Chicago Mercantile Exchange, global agency Fitch Solutions said they expect the price to jump to $2800/ounce by the end of the year.
“We are revising up our 2024 gold price forecast from $2,250/oz to$2,375/oz, expecting gold prices to trade within the range of $2,500-2,800/oz in the coming months,” Fitch Solutions said.
"This marks a departure from the $1,943/oz average seen in 2023. We are now neutral to bullish towards gold for Q4 2024-Q1 2025, as prices receive support from the US Fed's rate cuts and high levels of geopolitical tension. That said, we note some downside risks to gold, especially if Trump wins the forthcoming US elections, which would support the US dollar and pressure gold. In the longer term, we expect gold prices to remain elevated in the coming years compared to pre-Covid levels,” the note concluded.
According to Icra Ratings, gold prices are buoyed by the evolving global economic and geopolitical environment, including ongoing tensions in West Asia, rising investment demand for gold amid expectations of more interest rate cuts, and the massive central bank purchases led by China and India. All this had the average domestic price surging 14 percent in FY24 and another 29 percent so far this year.
Another reason for the domestic price spurt is the massive cut in the import duty on gold by 9 percentage points by the government in the budget. Though this led to a temporary price correction, it rebounded in a month’s time.
“Gold prices are expected to remain elevated in the near-term, influenced by the expectation of interest rate cuts across major economies,” Karthik Srinivasan, a senior vice-president at Icra Ratings, said.
Saumil Gandhi, a senior commodities analyst at HDFC Securities, told The New Indian Express that he anticipates some consolidation and a minor correction in the gold prices, but overall, for the medium to long term, the view remains bullish.
“Based on the geopolitical uncertainties, substantial global ETF inflows, dovish monetary policy by Western central bankers, and a lower dollar index all continue to support the bullish gold trend. The previous resistance zone of $2550-2580 has now turned into a strong support zone for gold, and we believe the trend will remain bullish for gold until it holds above the $2550 level with an upside target of $2750-2805. In domestic markets, the gold price is likely to move towards the Rs 7,822/8,000 level with strong support at 7350/7230,” Gandhi said.
Colin Shah of Kama Jewelry told TNIE that gold has posted the highest returns in the past 14 years both in dollar as well as in rupee terms.
"The rally in gold prices continues with prices touching near $2700 in the international markets -- over Rs 75,400 in the domestic market. In the year to date gold has already posted over 29 percent returns in rupee terms, and over 28 percent in dollar terms, making this year’s gains the highest in the past 14 years both in dollar and rupee terms,” Shah said.
The metal has provided an average 11.7 percent returns in the past 15 years and has provided positive returns in 12 of the 15 past years, with negative returns coming only in 2013, 2015 and 2021. Interestingly, the current year's gold returns have beaten the returns posted by Nifty in rupee term. Nifty gained 20 percent and Sensex gained 19 percent so far this year.
On the price expectation, Shah said, “The demand for gold is expected to be robust with the onset of the festive season. A good monsoon will push rural demand. Gold prices are currently testing the $2700 levels. The expectation is it may touch $3,000 levels and domestic prices may cross Rs 78,000 in the medium to long-term.”
According to Rahul Kalantri, vice-president--commodities, at Mehta Equities, bullion prices have increased by more than 29 percent this year, with numerous new highs set on prospects of rate cuts in the US, safe-haven demand, and strong central bank purchases.
“The overall trend for gold remains bullish and we are expecting it will go till $2800-2950/ounce; however, major resistance lies at $2695 or Rs 7,600 in the domestic market. A fresh rally is expected only if this level is surpassed. We anticipate a pullback before the rally, potentially pulling gold back to the $2,620-2,580 levels,” Kalantri told TNIE.