Gold prices may hit ₹61,000 per 10 grams, Silver may touch ₹75,000 this Diwali: Experts
- Gold is traditionally seen as a safe haven asset. During periods of geopolitical uncertainty, investors tend to seek refuge in assets that are considered less risky than equities or currencies. Gold's inherent value and lack of counterparty risk make it an attractive option.
Gold prices are likely to hit ₹61,000 per 10 grams levels this Diwali that falls in mid-November, analysts said. This is a growth of around ₹2,000, or 3.3%, from the current market price of the yellow metal.
Silver prices are also expected to see a rise of around ₹5,000 per kg from here and trade around ₹75,000 levels in Diwali 2023.
The expectation of a rally in gold and silver prices comes on the back of a sustained positive environment for the bullion in the global as well as domestic markets, analysts said.
“This is a perfect environment for bullion. The escalation of geopolitical tensions, dovish tone from the US Federal Reserve, buying by central banks and rise in physical demand are all factors that will lead to a rally in gold prices,” said Ajay Kedia, Director, Kedia Advisory.
According to Kedia, gold prices may hit ₹61,000 - 61,500 levels and silver prices may touch ₹75,000 - 76,000 this Diwali.
Gold prices have risen over 17% since Diwali last year, while silver prices have jumped more than 23% since Diwali 2022.
Here are some of the key factors that are expected to support gold prices:
Israel-Palestine War
The key factor playing in support of bullion prices is the escalating geopolitical tensions in the Middle East with the outbreak of the Israel-Palestine war.
The raging war between Israel and Hamas sent investors scuttling to the safe-haven bullion. Gold, viewed as a safe investment during uncertain times, hit $1,934.82, its highest since September 20, earlier in the session. That was after it surged 3.4% on Friday in its biggest one-day rise in seven months.
Even on Multi Commodity Exchange (MCX), gold registered an intraday rise of ₹1,497 per 10 gm on Friday, which was its biggest rise on the bourse since 13th March 2023.
Gold benefits from economic distress as investors tend to shun risky assets.
“Gold is more appealing when the opportunity cost of holding other assets with interest rates, as the yellow metal carries nil interest rates. Usually, in war-like situations, the interest rates may be low or even negative. Furthermore, gold is highly liquid even in times of crisis making it a trusted asset during extreme situations. As this metal performed well during crisis periods historically, influencing investor behaviour as well,” said Hareesh V, Head of Commodities at Geojit Financial Services.
Dovish US Fed
Dovish comments from the US Federal Reserve officials increased bets that the central bank will not increase interest rates going ahead.
On Friday, another member of the Fed's rate-setting committee said the central bank is on track to achieve the rare feat of lowering inflation without causing a damaging recession.
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“I believe that a resolute, but patient, stance of monetary policy will allow us to achieve the soft landing that we all wish for our economy,” Philadelphia Fed President Patrick Harker told a conference in Delaware.
The US Fed recently slowed the pace of its interest rate hikes after lifting rates to a 22-year high, citing progress made in the inflation fight. Expectations that the Fed will not hike interest rates further will support non-interest yielding billion prices.
Buying by Central banks
Central banks worldwide increased their gold reserves for the third consecutive month in August, adding 77 tonnes to their global official reserves, a 38% increase from July.
The People's Bank of China added 29 tonnes to its reserves, bringing its total gold holdings to 2,165 tonnes. The National Bank of Poland added 18 tonnes, boosting its stockpile to 314 tonnes. Other buyers included the Central Bank of Turkey, Uzbekistan, India, Czech National Bank, and Kyrgyz Republic. The Central Bank of Russia also saw a 3-tonne increase in reserves, as per data from World Gold Council.
Asian demand
The physical demand for gold and silver is expected to rise in the upcoming months in India owing to the festive season which will support the bullion prices going ahead. Similarly, China may also see increased demand in January due to the festivals in the region.
Hence, high physical demand from Asia may keep gold prices upbeat.
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.
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