Gold prices hit over 2-month low; should you start accumulating bullion?

Gold prices tumbled to hit their lowest level in over two months on Tuesday as investors resorted to the dollar amidst positive expectations over the US debt ceiling deal. Also, reduced estimates of a pause in a rate hike from the Federal Reserve in June policy weighed on non-yielding bullion. Due to a pullback in international prices, MCX gold futures traded range-bound to near ₹59,500 per 10 grams. More price correction is expected, and in such a situation, is it the right time to make fresh buying or accumulate the bullion?

Spot gold dipped by 0.3% to $1,937.99 per ounce --- the lowest level since March 17, 2023. Similarly, US gold futures slid down by 0.4% to $1,936.80 per ounce.

Meanwhile, MCX gold futures maturing on August 4th, traded at ₹59,586 per 10 grams up 0.15%. Also, the gold futures maturing on June 5th, performed at ₹59,500 up by 0.14%. Silver futures maturing on July 5th, however, traded lower by 0.11% to ₹71,050 per 1 kg.

On Monday, President Joe Biden hinted that he was optimistic about Congress passing the debt ceiling deal that he discussed with the House of Representatives Speaker Kevin McCarthy.

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Michael Langford, director at corporate advisory AirGuide told Reuters that high volatility events such as the U.S. regional banking crisis, and whether or not an agreement would be reached on raising the U.S. debt ceiling are now passing, "reducing the markets' interest in gold as investors seek alpha.

If that is the case, is it the right time for investors to buy gold?

Hareesh V, Head of Commodities at Geojit Financial Services expects more correction in gold prices currently.

He said, "There are chances of more correction in prices in the immediate run." Hence, he advised investors to wait further for fresh investment.

On the other hand, Jateen Trivedi, VP Research analyst at LKP Securities said, "Gold prices have shown decent correction even before any such negative event actually took place like the US debt ceiling which is yet to reach a conclusion on raising the debt bar or default."

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According to Trivedi, gold has more or less been priced in the negative effects due to dollar appreciation in the last few weeks where in prices of the dollar have risen from 101.50 - 104$ and Good in Comex decent decline from 2080$ to 1950$, and in MCX we have seen 62000 has been corrected to 59000.

Thus, Trivedi said, "Investors who were waiting for opportunity to enter into Gold position should happily start accumulating as prices can take small beating towards 58500 but do not see prices going below 58000. For the upside potential of 62000 again buying is recommended in accumulating manner."

Geojit's commodities expert is also bullish on gold on a long-term basis.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.