Home / Markets / Commodities /  Near term gold prices likely to remain under pressure: Buy or wait?

Gold prices have been under pressure as major global central banks tightened monetary policy. Despite the downturn, gold prices have climbed over 2% YTD and 6.6% in the last year. Ahead of the US Fed's FOMC meeting on March 21st and 22nd, 2023, gold futures on the Multi Commodity Exchange (MCX) for April expiry were last seen at a close of 55769 per 10 gm on Monday. Gold and silver were trading higher on the international market, at USD 1,856 per ounce and USD 21.24 per ounce, respectively, during the last session.

According to Jatin Gohil, Technical & Derivative Analyst at Reliance Securities, MCX Gold April futures, observed strong rally after that it stuck in the broad range of consolidation where strong support can be seen near Rs. 55,600 and on higher side hurdle is near Rs. 56,000 mark. This remain continue in the evening session till support or resistance breaches with strong candle and volume.

Globally, gold prices fell as speculators awaited U.S. Federal Reserve Chair Jerome Powell's speech this week for cues on future rate hikes. Gold lost 1.4% to $1,821.99 per ounce as central bank unpeaceful fueled expectations of higher interest rates. Gold futures slid 1.6% to $1,826.10 per ounce.

According to Kunal Shah, Head of Commodities Research , Nirmal Bang Commodities Private Limited, the U.S economy continues to grow strongly, major indicators like retails sales, pce index, new home sales, all pointing towards tightening will continue which can lead another 1-2 hikes of 25 bps and Europe 2-3 hikes of 50bps-25bps on the cards. So in near term gold prices may remain under pressure but from last 6 months more than investors central banks remain major buyers in gold for diversification.

Kunal Shah said “The reasons now gold is a strategic investment as rapid rise in balance sheet of central banks due to huge printing at the times of pandemic and now deleveraging of balance sheet brings central bank at uncharted territory as never ever in the history of financial market such monetary experiments has been done so nobody knows what will happen, coupled with Cold War like scenarios across the globe. Major economies military budget is expanding, today even Beijing stated military budget - around $225bn around 14% of total budget, on other hand the U.S budget is four times than of China so downside and timespan of golds correction will be smaller and short lived may be 1-3 months before it begins its upward Journey. We remain very bullish from two years horizon in gold and $2200 remains our target."

Colin Shah, MD, Kama Jewelry said “Gold prices have been under pressure due to the monetary policy tightening by major global central banks. Despite the fall, statistically, gold prices have risen nearly 2% YTD, 6.6% in the past year. In fact, Gold prices posted double-digit returns in 2022 where the benchmark Nifty was up around 4-4.5%."

“A hike in rates makes gold less attractive as an investment class. A rise in rates globally pushes USD upwards making gold buying dearer. Gold prices are likely to face some pressure as central banks have indicated further rate hikes in the remainder of 2023. However, an escalation in geopolitical tensions and a slowdown in the global economy will support gold prices on the upside," further added Colin Shah.

Rajesh Rokde Vice Chairman - All India Gem and Jewellery Domestic Council (GJC) said “As we know History shows near future,as per today's situation Gold still looks bullish and every deep in the Gold Rate is good opportunity to buy gold by mcx or by phiscal, one should also keep an close eye on Gold market as we are aproching march end."

On Monday, the rupee gained 5 paise to settle at 81.92 versus the US dollar. The dollar index, which measures the strength of the US dollar against a bundle of six currencies, climbed 0.6% to 104.58.

Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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