Home >Markets >Commodities >Gold prices up 3000 this month. Why rates are rising and should you buy now?

Gold prices rose this week in India, amid positive global cues. On MCX, gold futures settled 0.35% higher at 47,350 per 10 gram. From levels of about 44,000 at the start of this month, gold prices have jumped about 3,000 per 10 gram. In global markets, gold hit a a seven-week high when it rose 0.8% to $1,778.04 per ounce.

Analysts say that the current leg of the gold's uptrend has been driven by supportive macro cues. US 10-year bond yields have fallen below 1.6% while US dollar has also fallen to two-week lows against a basket of other currencies. Lower yields boost the appeal of bullion, which doesn’t offer interest.

Providing further fillip to gold prices, Reuters, citing sources, reported that China, the world's biggest gold consumer, has given domestic and international banks permission to import large amounts of gold into the country.

Inflation concerns also helped gold. The yellow metal advanced despite robust US retail sales data and a significant drop in weekly jobless claims.

Kotak Securities advised buying only on corrective dips. "Gold has edged up as Fed officials seem to have managed to convince bond market players that rates may remain low for a long time. The momentum for gold still looks positive. However with challenges persist in form of increasing US optimism hence fresh buying should be only at corrective dips," Kotak Securities said in a note.

Technically, analysts say, gold rose above the key resistance level of $1,760, a positive signal for traders who follow chart patterns.

“The rise in the number of Covid cases, fear of the next wave, coupled with rising inflation in the US, lower yields, weak US Dollar, and the QE program by the US government has also provided strength to the gold prices. The current situation of rising covid cases threatens to derail the economic recovery in Q1, create uncertainties. The situation may lead to elevated gold prices in the short term till the situation stabilizes," says Nish Bhatt, Founder & CEO of Millwood Kane International.

However, a pick-up in global economic activity will lead to subdued gold prices, but the risk of the second wave, uncertainty remains which may guide gold prices in the longer term, he added.

Despite the recent uptrend in price, the precious metal is still down 9,000 from August highs of 56,200.

Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services, said gold prices have moved higher as US Treasury yields slipped despite better than expected US economic data, pushing investors to bullion as a refuge against possible inflation ahead.

"Concerns regarding inflation is increasing ahead of massive fiscal aids and ultra-low interest rates across the globe supporting the metal. Gold prices also got a boost after the U.S. government imposed a broad array of sanctions on Russia," he added.

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