Gold delivers 8% return in first quarter of 2023. Opportunity to buy on dips?

Gold rate today: On account of bank crisis in US and Europe and fear of economic slowdown, gold prices delivered stellar return among all assets in first quarter of the current year (CY) 2023. On MCX, gold prices shot up from around ₹54,975 per 10 gm to ₹59,371 per 10 gm levels during January to March in CY23, logging near 8 per cent rise in the recently ended March 2023 quarter. In quarter to quarter (QoQ) time, the yellow metal ended higher on second straight quarter.

According to commodity market experts, gold rate today has immediate resistance at ₹60,600 per 10 gm levels on MCX whereas in international spot market, gold prices are facing resistance at $2,000 per ounce levels. They said that gold prices are still in uptrend and on breaching of these resistance levels in domestic and international market, we can witness fresh leg of rally in the precious yellow metal.

Factors that fueled gold prices

On why gold rates are rising these days, Market expert Sugandha Sachdeva said, "Gold prices witnessed a remarkable advance in March and remained one of the best-performing assets in the first quarter of this year, gaining by around 8 per cent. It was the second consecutive quarter where prices remained in the positive territory, reflecting buying exuberance. Expectations of a dovish pilot by the US Fed, persistent inflation worries, concerns of a slowdown in global growth momentum, and strong buying by the central banks have buoyed the prices of the metal considered to be a safe-haven."

Sugandha went on to add that concerns about the contagion from the bank crisis in US and volatility in financial markets further accentuated interest in gold deemed as a hedge against any economic or geopolitical uncertainty. Weakness in the dollar index wherein it softened for the second consecutive quarter further prompted the continuation of a move on the upwards incline.

Expecting US Fed to go further soft on interest rate hike, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, "As the US economy is under pressure, investors are hopeful that the Fed will now be soft on interest rate hikes, strengthening safe haven demand." He went on to add that after emerging from the COVID-19 restriction policy, China's economy shows steady growth, increasing the physical demand for gold.

"Gold withdrawals from the Shanghai Gold Exchange have increased by 76 tons year-on-year, the highest since 2014. The rise in gold outflows from the exchanges indicates strong demand from the wholesale market. China reported the highest gold import in 2022 after 2018. The People's Bank of China started official gold purchases in November and continued in February. An increase in the gold premium in Shanghai and London indicates further strength," Nirpendra Yadav said.

Gold price outlook

On outlook for gold price in near term, Sugandha Sachdeva said, "The overall price setup still indicates further room for upside in the precious metal in the long term given that the rates are likely to peak out very soon which could be a boon for gold prices, but buying on some declines would be the apt strategy."

"While considering the near-term outlook, prices seem prone to the risks of profit booking where the level of $2000 per ounce mark is acting as a major barrier in the international markets, while the Rs.60600 per 10gm mark remains near-term resistance in the June contract. Only a convincing move past these key levels would further lead to a flare-up in prices. With concerns about the US financial sector receding and revival of “risk on” trade in the global markets, gold prices may give way to some selling pressure in the coming days, where support is seen at Rs.58000 per 10gm mark and then Rs.56700 per 10gm mark," Sugandha concluded.

Will gold price climb a new peak?

Expecting rally in gold price to climb a new peak in short to medium term, Anuj Gupta, Vice President — Research at IIFL Securities said, "Immediate support for MCX gold price is placed at $1,960 levels whereas $1,945 is major support for the precious yellow metal in international spot market. We are expecting fresh leg of rally in the precious metal as Dollar Index has come below 102 levels and it may break its current support placed at 100 levels. Gold price may rest $1,990 and $2,020 per ounce levels in near term and if it sustains above $2,020 per ounce levels, then we can expect it to first hit $2,050 and then $2,100 and $2,200 levels, breaching its current life-time high of $2,075 per ounce levels."

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.