Gold price breaks consolidation mode. Should you buy or accumulate?

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Gold price today at Multi Commodity Exchange (MCX) is around 3600 lower from its recent high of 55,558 per 10 gm levels. MCX gold rate on Friday closed at 51,888 levels, ending 190 or 0.36 per cent lower from its Thursday close. However, spot gold price nudged 0.02 per cent higher and closed at $1957 per ounce levels. According to commodity market experts, demand for safe haven has re-emerged as there is no meaningful progress in Russia-Ukraine peace talks. Amid soaring crude oil prices, Russian President is seeking payment for natural gas sales in roubles from “unfriendly” countries, which may further fuel oil prices globally.

Market experts said that spot gold price has strong support at $1850 whereas MCX gold price today has very strong support at 48,800 per 10 gm levels. They said that any dip in gold price should be seen as buying opportunity as there can be some sharp appreciation in yellow metal if Russia Ukraine peace talks fail to give any positive development in near term.

Expecting fresh gold price rally in near term; Vidit Garg, Director at MyGoldKart said, “Gold price has broke the weekly consolidation mode, as surging oil price accentuated fears over raging inflation and global economic growth, benefiting the inflation-hedge gold. Meanwhile, a stronger NATO response to the continued Russian hostilities in Ukraine kept risk trades shallow. Further, investors remained wary, as US President Joe Biden and European NATO counterparts prepare for the risk of Moscow launching a nuclear attack.”

Sugandha Sachdeva, VP — Commodity & Currency Research at Religare Broking Ltd said, “Gold prices witnessed some rebound this week as safe-haven demand re-emerged amid no meaningful progress in Russia-Ukraine peace talks. In the prior week, we have seen a sharp dip in prices as a surge in the US treasury yields and fears of aggressive tightening measures by the US Fed dented the metal’s appeal and led to profit booking at higher levels.”

Sugandha Sachdeva of Religare Broking went on to add that while soaring dollar and treasury yields, which increase the opportunity cost of holding non-yielding bullion, capped the upside, the lingering geopolitical tensions are still underpinning gold’s investment appeal. The US and European nations have teamed up on a series of fresh sanctions to inflict further economic pain on Russia. These sanctions even prohibit financial transactions with Russia’s Central Bank that involve Russian gold. Russia has amassed the fifth largest gold reserve in the world and this move will impede financial transactions with other countries that continue to do business with Russia and exert pressure on the rouble.

On soaring energy crisis and its near term impact on gold price; Sugandha Sachdeva said, “Russian President is seeking payment for natural gas sales in roubles from “unfriendly” countries, which could lead to a further supply squeeze and rise in prices, while worsening the energy crunch. With buoyant commodity prices across the globe and uncertainty about the long-term impact of the war on global economic growth, gold would remain a favorite bet for investors.”

Speaking on spot gold price outlook, Vidit Garg of MyGoldKart said, “Buying resurgence could see price resuming the uptrend towards the $2000 per ounce level. Gold price above $2005 levels, which is high of parallel line will lure buyers. Bulls will then gear up for a test of $2030 to $2040 levels. On the downside, a firm break below the previous week low of $1895, which is now support will trigger a steep decline towards the upward pointing 21-week EMA at $1866 levels. The next support of the 50-week EMA awaits at $1830 break, which will allow bear to flex their muscles towards $1765 levels.”

Advising buy on dips strategy to gold investors; Sugandha Sachdeva of Religare Broking said, “Considering the macro-economic landscape, we reiterate our view that gold looks favorable from a medium to long-term perspective. Any near-term weakness can be used as an opportunity to buy the metal gradually, where 48,800 per 10 gm or $1850 per ounce would act as strong support. On the higher side, near term hurdle is seen at 53,500 per 10 gm, while major resistance is pegged at 56,000 per 10 gm mark.”

For those gold investors who want to play safe; Amit Sajeja, Vice President — Research at Motilal Oswal said, “Recent rise in spot gold price can be a pull back rally cause by short covering too. So, those who want to play safe are advised to wait for breakout in spot gold price at $2000 levels on weekly closing basis. Then only one should buy and hold for long.” He said that high risk traders can maintain ‘buy on dips’ strategy with strict stop loss as gold price is expected to remain highly volatile and single Russia-Ukraine news would lead big change in the yellow metal price.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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