Commodity Talk: Gold’s 13% H1CY2024 returns robust, but positives priced-in now, says Anuj Gupta

Most bullish factors are priced in bullion now and we believe that after registering strong gains in the last three months, bullion prices are likely to witness a correction in the short term, Anuj Gupta, Head Commodity & Currency at HDFC Securities said. In the long term, he remains bullish expecting this precious metal to test Rs 78,000-Rs 80,000 levels by the end of the year.

Edited excerpts:

Gold has given 13% returns in H1CY2024 amid ups and downs. How will you rate its performance during this period against your expectations?
Gold’s rally has been more than what Nifty has delivered till date. The gains have been on account of bullish buying by major Central Banks across the world. Moreover, geopolitical tension and fear of slow down in Europe and the US also played their part. All these factors have been positive for gold being a safe haven for investors. On the flip sided equities and Nifty have suffered as a consequence of this.

How has gold performed historically in H1 and in which year it delivered its best performance?
Average returns by gold over the past five years are at 8.43%. Its best six-month performance has been in 2020, the year of Covid lockdowns. That year gold yielded nearly 25% returns. The next highest are in 2024 at 13.26%. In H1 of 2022 and 2023, the returns were 5% and 6%. It has given negative returns of 6.60% in 2021.

Gold’s biggest challenge it seems now is the US economy which would have an impact on Fed action and dollar index (DXY). Over the last one month, DXY has gained 1.3% which has been detrimental to the cause of gold. How do you see this panning out for gold?

Due to an inverse relationship between the dollar index and gold, we saw that gold corrected almost 3% from its high of 74,442 last month. Dollar index increased by almost 1 % from April 24 to till date. Dollar index is taking cues from Fed’s decision of remaining non-committal on interest rate cuts. If they cut rates then gold prices may increase further.

What is the outlook for gold in the next half of the year?

Most bullish factors are priced in bullion now and we believe that after registering strong gains in the last three months, bullion prices are likely to witness a correction in the short term. In the long term, our view is bullish. We are expecting that this precious metal could test Rs 78,000-Rs 80,000 levels by the end of the year. What trades should the gold and silver traders take?
Based on our analysis, we anticipate that gold prices in the international markets may experience a correction towards the $2,217–$2,180 per troy ounce once the price breaks the support of $2,275. The yellow metal is finding resistance at $2335 and $2388.0.
On the MCX, Gold August futures have support at Rs 70,080 and a fall below this level will drag the price to Rs 68600. Short-term traders should adopt a sell-on-rally strategy. In the long term we expect gold may test Rs 78,000 to 80,000 levels.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)