Dollar index fell in May, registering its second consecutive monthly loss, and making gold less expensive for non-dollar buyers. Silver prices had also rallied along with gold last month, led by a weaker dollar and rising industrial demand
NEW DELHI: Gold prices rallied last month, supported by a softer US dollar and growing inflationary pressures. MCX gold has an immediate support at around Rs48,800 and as long it sustains above this level, prices may target Rs51,000 level, according to an ICICI Direct Research report.
Gold, often used as a hedge against inflation, has benefited from recent data showing a rise in prices in the US and UK. However, Federal Reserve officials have repeatedly maintained they expect any rise in inflation to be short-lived and said the monetary stimulus would stay in place for some time.
“Gold prices rallied strongly to their five-month high and posted their biggest monthly jump since July 2020, supported by a softer dollar and growing inflationary pressures while investors awaited key US data that will provide a clearer picture on the global economy’s recovery path," ICICI Direct said.
Moreover, the dollar index fell sharply last month and registered its second consecutive monthly loss, making gold less expensive for non-dollar buyers.
Silver prices had also rallied along with gold last month, led by a weaker dollar and rising industrial demand.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, remained at lower levels last month, which indicates that silver has continued to outperform the yellow metal since last year.
“Overall, we expect silver prices to continue this rally towards Rs78,000 level as long as they sustain above their immediate support of ₹70,000 level as rising inflationary pressures will also benefit silver along with gold as a hedge against inflation. Also, continued investments into silver-dependent green technologies will push silver higher," the report said.