Ahead of Dhanteras, gold prices are down ₹5,000 from this year’s highs
- Investors looking to invest in gold and silver with a medium to long-term outlook can start to accumulate at these levels: Motilal Oswal
Gold prices today remained in a narrow zone in Indian markets with futures on MCX trading in the zone between ₹50,065 and ₹50,386 per gram. In comparison, gold had settled at ₹50,200 in the previous session. Silver futures jumped 1% from ₹56,640 per kg. In global markets, spot gold rates were mildly higher at $1,631.54 per ounce. Spot silver rose 0.2% to $18.47 per ounce.
Dhanteras, which marks the first day of Diwali in India, is considered auspicious to buy gold and silver as part of Hindu festivities.
Rising yields in major bond markets and outlook for further monetary policy tightening by most central banks are weighing on gold prices. The precious metal is down sharply from its March highs of $2,000. In India, prices had touched ₹55,000 levels in March.
The Fed is widely expected to hike interest rates by 75 basis points at its policy meeting next month after US consumer prices increased more than expected in September. On Wednesday, Federal Reserve Bank of Minneapolis President Neel Kashkari said that US job market demand remained strong and underlying inflation pressures probably had not peaked yet.
While gold is often considered a hedge against inflation, rising U.S. interest rates increase the opportunity cost of holding the zero-yielding metal.
Jateen Trivedi, VP Research Analyst at LKP Securities, said that gold remained in a range but on MCX prices saw some support as rupee depreciation helped the gold bounce off lows. The rupee today hit a fresh low beyond 83 per US dollar before pulling back. The rupee is down about 10% against the US dollar so far this year.
“Gold prices can be in a range in the domestic market as prices can see physical demand on the festive season, and rupee depreciation. But Comex Gold faces selling as dollar index rises hence range bound volatility,” he added.
In a note Motilal Oswal said: “On domestic front, gold and silver prices gets a boost during festive season. Fall in precious metal was restricted following rupee depreciation that was to the tune of 10% coupled with hike in basic customs duty on gold imports by 5%. As India is a price taker any movement in COMEX affects our prices. Macro-economic backdrop does have an upper hand this year, major focus is on central bank’s monetary policy, inflationary pressure, and geo-political tensions. If there are any changes in these factors, we could see some short covering, which could take gold prices much higher and quicker, but we feel that till the time we don’t see a change in stance from major central bankers with respect to aggressive interest rate hikes, we could continue to witness pressure on gold prices.”
However, the brokerage said “amidst these uncertainties, it is advisable to have gold and silver in one’s portfolio. Hence, anyone who is looking to invest in gold and silver with a medium to long-term outlook can start to accumulate at these levels.” (With Agency Inputs)
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