Home / Markets / Commodities /  Gold price rebounds after ease in dollar index. Should you join this rally?

Gold rate today: On account of hawkish central banks across world and retreat in dollar index from record high of 114.77 levels, gold prices bounced back strongly and registered 1.61 per cent rise in the week gone by. At Multi Commodity Exchange (MCX), gold rates finished at 50,027 per 10 gm levels whereas spot gold price ended at 1,660 per ounce. Indian National Rupee (INR) too witnessed strong rebound after Reserve Bank of India (RBI) announced a 50 bps repo rate hike to 5.900 per cent on Friday. After RBI's monetary policy announcements on Friday, rupee recorded its highest gain in last 20 days. Dollar index closed at 112.16, logging 0.04 per cent intraday loss on Friday session.

According to commodity market experts, after US Fed's uber-hawkish stance on interest rate hike, most of the central banks in the world have gone hawkish on interest rate as they are concerned about their national economy after the 'unethical rise of dollar index leading to fall in its respective currencies.' Hence, they are expected to raise interest rates soon and RBI's decision to raise repo rate should be seen from this angle. They said that gold rates today are in 'uptrend' and this trend is expected to remain in upcoming festive season in domestic and international markets. They said that spot gold price may surge up to $1,710 levels whereas MCX gold price may go up to 52,500 by this Diwali.

Retreat in dollar index

Speaking on the reason for rise in gold rates globally, Sugandha Sachdeva, Vice President — commodity & Currency Research at Religare Broking said, "Gold prices remained highly volatile last week but managed to rebound significantly and close with gains of 1.61 per cent at the domestic markets. The precious metal maintained its inverse correlation with the dollar index, wherein it initially surged towards a fresh two-decade high of 114.77 but then erased much of the gains to end with losses of around 0.71 per cent. The US Fed’s tightening cycle and uber-hawkish stance as compared to the other key central banks have been the major factor supporting the dollar this year."

However, the Religare expert maintained that retreat in the US dollar from the recent highs led to money moving towards the safety of gold. Besides, risks of global economic slowdown also favored buying interest in the precious metal. She went on to add that it was the Indian Rupee depreciating towards a record low of 82 mark which provided a cushion to the highly volatile gold prices last week.

Gold price by Diwali — here's what experts say

On gold price outlook, Anuj Gupta, Vice President — Research at IIFL Securities said, "Overall gold price outlook is positive as central banks across world have shown concern about their respective economies due to the recent unethical rise of dollar index leading to fall in their respective currencies. Hence, central banks across world are expected to raise interest rates and Indian central bank raising repo rate should be seen from this aspect. We are expecting dollar index to breach its current support of 110 and it may go up to 108 levels by Diwali 2022." He advised short term investors to buy gold and hold it till Diwali.

Sugandha Sachdeva of Religare Broking said that risks of global economic slowdown also favors buying interest in the precious metal. She said that gold rates have managed to hold above the key support of 48,800 per 10 gm mark at the domestic markets, despite the significant fall witnessed in the international markets for the last six consecutive months.

"Going ahead, the said support remains a sacrosanct mark and we may see a continuation of buying interest in the coming days. Any dips towards 49,500 per 10 gm zone would be a good opportunity to accumulate the metal for a near-term target of 50,700 per 10 gm mark," Sugandha Sachdeva said.

Echoing with Religare analyst's views, Anuj Gupta of IIFL said, "Immediate support for spot gold price is placed at $1,610 whereas it is expected to go up to $1,710 per ounce levels by this Diwali. On MCX, gold rates are expected to go up to 51,300 per 10 gm in near term whereas it is expected to go up to 52,500 per 10 gm by this Diwali festival." He said that those who have very short term view can book profit at around $1,695 per ounce levels in spot market and at 51,300 levels on MCX.

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


Asit Manohar

Chief Content Producer at Live Mint Digital Team
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