Gold price on cusp of giving breakout in spot market. Should you buy now?

Gold price today: On account of continuous fall in the dollar index and the benchmark 10-year note slipping to six weeks low, gold price rally continued for second successive week. Gold future contract for June 2022 on Multi Commodity Exchange (MCX) ended at ₹50,928 per 10 gm levels on Friday whereas spot gold price ended around 1853 per ounce levels after making an intraday high of 1862 per ounce.

According to commodity market experts, spot gold price may scale further northward once it closed above $1865 levels. They said that profit-taking in dollar has once again increased demand for gold among the investors whereas weak US GDP, housing and manufacturing data further fueled the yellow metal rally. They went on to add that after giving breakout above $1865 levels, spot gold price may go up to $1900 levels in short term whereas MCX gold rate may go up to ₹53,000 per 10 gm levels in this period.

Speaking on the reasons for gold price rally, Vipul Srivastava, Research Analyst — Metals and Energy Research at Religare Broking Ltd said, "Gold prices continued to gain traction as the precious metal headed for a second weekly gain after the recent price correction. The dollar index fell for the second consecutive week and the benchmark 10-year note slipped to a fresh six-week low, both of which favored strength in gold. However, gains were capped by the U.S. Federal Reserve's aggressive stance in its minutes of the May meeting. Additionally, a respite in global equities undermined the bullion’s appeal."

Vipul Srivastava went on to add that the economic releases of last week highlighted the economic concerns, where the US GDP witnessed a contraction in the first quarter. Also, weak housing and manufacturing data from the US raised the fears of a possible slowdown in economic growth, while the scorching inflation remains a key concern globally. As per the prevailing backdrop, gold seems to flaunt its shine going forward.

Expecting gold price rally to further continue, Anuj Gupta, Vice President — Research at IIFL Securities said, "Gold price in spot market is on cusp of giving breakout above $1865 levels. After this breakout, spot gold price may go up to $1900 per ounce levels in short term whereas MCX gold price may go up to ₹53,000 levels in this period. Speculations about weakness in the US economy, rising inflation concern as Russia-Ukraine war has entered fourth month and sluggish Chinese demand in manufacturing sector may continue to push yellow metal rally in short term."

On gold price outlook for near term, Vipul Srivastava of Religare Broking said, "For the coming week, the trend is likely to favor bulls where yellow metal is likely to head towards ₹51,500 per 10 gm level initially and could extend further next at ₹52,200 per 10 gm level. On the other hand, prices could find an immediate floor near ₹50,300 per 10 gm mark, whereas the next key support is seen at ₹49,700 per 10 gm mark."

On where this gold price rally is heading, Dr. Joseph Thomas, Head of Research at Emkay Wealth Management said, "While the surging inflation in the major economies of the world makes it an appropriate choice for some amount of value preservation, the strength in the US Dollar and the rising US rates are putting pressure on gold price. There is a clear positioning from the Fed that the rate hikes will continue till inflation is tamed. And only after reliable data to the contrary is available should there be any change in the interest rate policy. The rising rates will make it quite attractive for investors to stay in the currency to earn the higher currency yield. This has also led to a strengthening US currency. Gold being quoted in US Dollars; the price is bound to come down. Hence, the upside level for gold may be capped at $1930 per ounce whereas $1760 and $1730 may act as key support levels for the yellow metal."

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