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Gold prices remained firm and ended with the fourth successive week of gains while hovering close to the psychological $1800 per ounce mark. Gold future contract for October on Multi Commodity Exchange (MCX) finished at 52,579 levels, around 1.37 per cent higher from its last Friday close of 51,864 per 10 gm levels. 

According to commodity market experts, softer US inflation data pulled down dollar index to 5-week lower levels that helped gold price to ascend at its 5-week peak. They said that the yellow metal is likely maintain its shine and can go up to 53,500 levels on MCX in short term. Advising 'buy on dips' strategy to gold investors, commodity experts maintained that spot gold price is oscillating in $1,760 to $1,820 per ounce range and once it breaks the upper hurdle it may go up to $1,820 per ounce levels.

Triggers that fueled gold rush

Speaking on the reason for gold price rise in the week gone by, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking said, "A softer than expected inflation print from the US was the key highlight of the week which suppressed the dollar index to a five-week low and favored flows in the safety of gold. The US consumer price index rose 8.5 per cent in July (Y-o-Y), at a slightly slower pace as against a red-hot inflation reading of 9.1 per cent in June. Besides, the US producer prices rose 9.8 per cent in July from a year earlier, compared to a forecast of 10.4% and the rise of 11.3% in June, amid improving supply-chain conditions."

The Religare analyst went on to add that the markets took an encouraging view of the report, underscoring that the price pressures have potentially peaked in the US largely due to a slump in energy prices, which eased bets of a steep monetary tightening path by the US Fed in coming months. Markets are now expecting the Fed to hike rates by 50 bps as against previously anticipated 75 bps increase at its September meeting. However, despite the moderation in inflation numbers, overall price pressures remain stubbornly high and various Fed policymakers have recently indicated that the US central bank is not going to get easy on rates in their attempt to subdue inflation, which cushioned the dollar index at the 104.63 mark and was seen capping gains in gold prices.

Besides, the UK economy contracted by 0.1 per cent in the second quarter, slightly better than the 0.2 per cent decline expected, though it was a sharp drop from the growth of 0.8 per cent seen in the prior quarter, which further helped the greenback claw back bulk of the weekly losses.

Gold price outlook

Expecting gold shine to continue in near term, Anuj Gupta, Vice President — Research at IIFL Securities said, "Overall outlook for gold looks positive and once should main buy on dips strategy as long as the yellow metal in spot market is in $1,760 to $1,820 per ounce range. One should buy on the lower levels and book profit on higher levels. However, once the precious metal price sustains above $1,820 levels, it may go up to $1,855 to $1,860 per ounce levels." Anuj Gupta of IIFL Securities said that MCX gold rates may soon touch 53,500 per 10 gm levels once it sustains above 52,800 mark.

"As for the price outlook, the overall trend looks positive for gold, but prices are seen consolidating at higher levels and not able to nudge past the crucial $1800 per ounce and 52,500 to 52,600 per 10 gm area at the domestic markets. A convincing move above the mentioned levels would open the doorway for further upside in gold prices towards $1835 to $1840 per ounce and 53,500 per 10 gm zone in the near term. So looking ahead, some profit booking is quite likely after the recent surge witnessed in gold prices, wherein they can edge lower towards 51,400 to 51,200 per 10 gm zone in the coming days. Nevertheless, gold is likely to maintain its shine and lower levels will again present bargain buying opportunities for higher targets of around 53,500 per 10 gm," said Sugandha Sachdeva of Religare Broking.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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