Commodity Talk: Bullion may shift gears on festive, wedding demand, says Anuj Gupta of HDFC Securities
October has given a fresh impetus to bullion, especially after the Israel-Hamas conflict erupted. How far do you see the rally going?
The ongoing geopolitical concerns have boosted gold prices to a five-month high. We believe global fund flow will continue to provide support to the current bullish momentum in gold prices due to factors like geopolitical unrest, a slowdown in global growth, the Fed policy pivot, and central bank buying. Additionally, ETF demand has started to shift positively, and we anticipate it will continue in the near future.
Are there other triggers that could help bullion sustain its current rally as short-term investors do not want to get caught off-guard if the trigger starts fading?
Other than the war, Fed pivot, central bank buying and the expectation of weaker global growth due to higher borrowing costs and high crude oil prices are the key triggers for further upside in gold.
How has been the festive season demand and can we know where the demand is strong and where it is weak in terms of cities/geographies?
Gold jewellery demand is likely to improve in the domestic market over the last quarter of the calendar year 2023 as the ongoing festival season and wedding season approach. However, overall demand remained lower compared to last year as a weak north-west monsoon and higher prices trimmed rural demand.
What is the demand like in silver from an investment and industrial requirement standpoint and will it be safe to invest in it considering that it has been very volatile this year? ?
In recent times, Comex silver has underperformed Comex gold, indicating a moderately bearish trend in base metals. So far this year, gold has given an almost 8% return, while silver delivered a negative 2%.
On the investment front, ETF demand continues to slide, and so far, this year, ETF investment has declined more than 7%. In the short term, due to its uncertainties on the international political and economic front, the industrial demand for silver could take a hit, causing volatility.
Bullion’s movement is directly linked with the prospects of the Dollar Index. What is its outlook and also greenback vis-a-vis the Indian rupee?
Bullion has a negative correlation with the dollar index and bond yields. We have seen in the last quarter that the dollar index surged more than 3.0%, while for the same period, Comex spot gold declined by 3.70%. We believe the dollar index is likely to top out around the 107 level and consolidate in the range of $103 to $104.0.What strategy would you recommend for traders?
The gold price short-term trend turned moderately bullish after a sharp jump in price in the last two weeks. Currently, the Comex gold price is trading well above its 200 DEAM ($1932). We anticipate bullish momentum will continue in gold prices, and prices can rally towards $2035/$2080 levels in the medium term. Traders should adopt a buy-on-dip strategy.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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