Market experts said that interest rate hikes amid inflationary pressures have eroded the appeal of the safe-haven metal.
Silver slipped below the Rs 55,000 mark on Friday while gold fell below the Rs 50,500 mark. Although precious metals have turned bleak, market analysts remain confident in them.
Prithviraj Kothari, managing director of RiddhiSiddhi Bullions (RSBL), said that tightening monetary policy by the Federal Reserve is hurting gold prices, which have been at multi-month lows recently.
He said rising inflation and nearly a year of persistently high CPI data were serious concerns, which triggered the aggressive pace of the Fed’s rate hikes. “However, in the longer term, rising recession fears will support gold prices.”
A stronger U.S. dollar has been a headwind for commodities, especially gold, as its price is high and expensive for users of other currencies.
In addition, NS Ramaswamy, head of commodities at securities, said that gold is now seriously affecting the inverse correlation of a stronger dollar. “It has been ignoring the direct link to hot inflation.”
Market participants expect the Fed to raise rates by another 75-100 basis points.
Anuj Gupta, VP Commodities,
Gold and silver prices pulled back sharply last week, in line with expectations, as recession fears also dented demand for the safe-haven yellow metal.
Ramaswamy of Ventura Securities sees the dollar index near its “peak” and expects funds to flow back into gold. “The dollar index is in overbought territory and a technical pullback is expected,” he added.
Market participants believe that the Fed will focus on concerns about the U.S. economy and stop raising interest rates in the fourth quarter of 2022 and the first quarter of 2023, and reclaim Treasury yields. That will be when the price of gold rises due to increased capital flows.
Kothari suggested that investors should continue to invest in gold through SIPs and take advantage of the decline to lower average costs. He expects gold at Rs 54,000 per 10 grams and silver at Rs 64,000 per kilo by the second half of 2022.
Technically, gold could fall further in the short-term, which is an opportunity for medium- and long-term investors, said Ramaswamy, who is moderately bullish on gold over the medium term.
“Silver underperforms gold as interest wanes. Once gold confirms a bottom, silver will start to lead gold,” he added. “One should buy silver after sustaining support at Rs 55,500 or even Rs 53,900.”
Gupta of IIFL Securities suggested selling gold with a target price of Rs 49,600 and silver with a target price of Rs 53,500. Stop loss can be kept at Rs 51,300 and Rs 59,000 respectively.
(Disclaimer: Advice, advice, views and opinions given by experts are their own. These do not represent the views of The Economic Times)