Investors are confused as to whether to buy the dip or short gold amid rising inflation, central bank rate hikes, a strong dollar and renewed worries about global growth.
Sugandha Sachdeva, Vice President, Commodities and Currency Research,
Gold is likely to see strong demand as a value investment after the recent dip, Broking said.
“We expect prices to recover from lower levels, with Rs 48,800 being a key level to watch. As long as prices stay above that level, we expect demand for the precious metal to resurface,” Sachdeva said.
RiddhiSiddhi Bullions managing director Prithviraj Kothari said Rs 50,000 is an important psychological mark for gold and it is likely to attract a lot of retail and institutional interest in safe-haven demand during these uncertain times.
Over the next six months, we could see gains of up to 20% from current levels, Kothari said.
Analysts believe that the precious metals are in a period of indecision, and investors are watching for more clues on the future course of action before taking a position due to a variety of factors.
Gold has fared relatively well amid heightened volatility in global stock markets amid high inflation, rising interest rates and uncertainty caused by the Russia-Ukraine war.
Sachdeva added that gold prices are likely to continue to trade sideways, but further declines appear unlikely as growth concerns, geopolitical uncertainty and rising inflation could boost gold’s appeal.
In a prevailing risk-off environment, at least for now, the downside remains buffered, which tends to favor safe-haven precious metals.
“The ideal strategy would be to sip gold electronically or physically and accumulate on each dip,” suggested Kothari, who believes 15-20% of a portfolio should be in gold.
On the other hand, Kshitij Purohit, a research analyst at CapitalVia Global Research, said that if U.S. Treasury yields continue to fall over the next few sessions, prices will be in a trend.
“Gold prices will continue to trend bearish and traders may opt for a bullish sell strategy in the coming sessions, in which case short holdings are likely to build on an upside market correction,” Purohit said.
What about silver? Silver prices underperformed gold as industrial metals sold off sharply amid China’s lockdown and a rebound in the U.S. dollar index.
“Prices are in oversold territory,” Kothari said. “Rs 58,000-60,000 is a very good level to invest in silver with a target of Rs 70,000 in a few months.”
Market experts say silver has fallen too fast and too sharply compared to gold over the past few sessions. Looking at the overall trend, investors can look for bargain buying opportunities in the white metal, they suggested.
“Silver is a mixed metal, and weakness in industrial metals is also weighing on prices for the white metal. However, at this juncture, the price setting suggests that silver and the base metals are oversold,” said Religare’s Sachdeva.
CapitalVia’s Purohit added that traders may find selling opportunities in silver’s upside correction. “Immediate resistance for the July contract is around Rs 62,000-64,500, an ideal range for short to medium-term short positions.”