Gold is predicted to rise in the near future since it is a safe haven asset, particularly during unpredictable geopolitical times, according to Emkay Wealth Management. The estimated price expectations for gold are still US$ 1990 and US$ 2030. Despite a strong dollar situation, the safe haven status has taken on significance, in contrast to the typical trend of gold moving up strongly in the weaker dollar scenario.
As investors awaited economic data for direction on interest rates and kept an eye on escalating tensions in the Middle East, gold prices rebounded on Tuesday with a decline in benchmark US Treasury yields.
By 03:49 GMT, spot gold was up 0.2% at $1,976.99 an ounce, while US gold futures were stable at $1,988.10, according to Reuters report. The US Treasury’s benchmark 10-year yield fell after momentarily scaling above 5% on Monday, adding to the likelihood of an economic slowdown due to increased borrowing costs.
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According to a Yes Bank report, the regional banking stress in the US and Europe caused risk sentiment to worsen, which led to a peak in gold prices in May 2023 of USD 2050/oz in CY23. Because of the stronger dollar and interest rates, gold prices had a tendency to decline; but, the demand for safe haven assets due to deteriorating risk sentiments as a result of the political turmoil in the Middle East buffeted them.
Due to the ongoing Middle East turmoil, investors are favouring gold, which has caused the asset class’s price to rise. Within the US$1880 to US$1860 range, gold prices have been firmly supported, said Emkay Wealth in its report.
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Considering the situation from before the conflict, Emkay Wealth highlighted that even if inflation was steady in all of the major economies, the excessively tight monetary policy that accompanied the inflation drove up interest rates prevented gold from appreciating significantly.
“The rise in money market yields made currency yields attractive and this has resulted in gold moving sideways most of the time. But the more interesting fact is that gold prices have not broken through any key support levels convincingly in the last three months,” said, Emkay Wealth.
Regarding supply, it is expected that fresh gold from the mines and used gold will be available in quite large quantities.
“We also expect continued demand from central banks. An easing monetary policy stance projected to come into effect in mid-2024 which will help bring an incremental value to the investors taking long positions from now,”Emkay Wealth said in its report.
Also Read: Gold rate today under pressure on ease in Israel-Hamas war. Time for Diwali buying?
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 24 Oct 2023, 11:43 AM IST