Wondering what should be your strategy for gold ahead of Diwali 2022? Read this

Gold prices have been in a consolidation phase since May at the domestic markets and are seen finding support at Rs 49,500/10 gm mark, while the upside is restricted around Rs 52,700/10 gm mark.

The aggressive monetary tightening campaign of the US Fed and strength in the dollar index have dented the investment appeal of precious metal so far, which could continue for some more time. Though prices could breach the mentioned mark in the near term, we don’t see it as a major challenge as of now.

In the international markets, prices are trading close to the concrete support at the $1680 per ounce mark, which is likely to provide a strong cushion to gold.

The precious metal has already corrected around 10 percent from its historic highs and the concerns of ebbing global growth momentum amid rising inflation and higher interest rates could attract safe haven demand going forward.

At the domestic bourses, prices are likely to find firm support near the Rs 48,800 per 10 gm mark and would provide a value buying opportunity for investors.

Only in case, there is a violation of $1,680 per ounce or Rs 48,800 per 10 gm mark on a sustained basis, we may see serious pressure in gold prices.

Outlook on gold ahead of festive season:

We believe that gold demand in the physical market will pick up during the festival period ahead. There is optimism among retail buyers, which is quite visible from the July sales numbers.

Besides, a combination of positive factors playing out in the current scenario would favor the bullion’s appeal. While wedding season and various festivities across the country would uplift the jewelry demand, a post-monsoon rural demand and lower prices would act as a catalyst for boosting investment demand.

Meanwhile, concerns about a global economic slowdown, elevated price pressures, and geo-political risks would entice buying interest in gold. So yes, we are positive about gold ahead of the much-awaited festive season.

What should be the ideal strategy:

Prices have already witnessed a decent correction in recent weeks and are holding near key support levels. A short unwinding and a buying interest near the long-standing support of $1,680 per ounce could underpin prices on lower levels.

Also, considering the upcoming seasonal demand season, we feel that it would be a buy-on-dips strategy that traders can adopt.

One can consider buying gold around Rs 49,500-49,800 per 10gm zone where prices are likely to witness a recovery towards Rs.51200-51500 per 10gm zone in the near term. On the other hand, eyes should be on the key support of the Rs 48,800 mark.

(The author is Vice President, Commodity and Currency Research,

Broking. Recommendations, suggestions, views and opinions are her own. These do not represent the views of Economic Times)