With the ongoing festive season and Diwali around the corner, the prices of gold may be set to touch Rs 80,000/10 gram, believe analysts as the yellow metal has maintained its upward trajectory for the third consecutive year.
With Diwali just three weeks away, we are entering a major festival season in India. Traditionally, buying gold during Diwali is considered auspicious, symbolizing prosperity and wealth.
Last year, in November (the month of Diwali), gold prices stood at Rs 59,448 per 10 grams, from where it has now surged over 18%, largely driven by the heightened geopolitical tensions in the Middle East and concerns about an economic slowdown following the Fed’s aggressive rate cuts.
Additionally, the impending U.S. presidential election introduces a level of political risk, further catalyzing the rally in the precious metal.
“While a technical correction is possible given the rapid price increase over the past couple of years, the overall market sentiment remains strong. Any significant dip is likely to be viewed as a buying opportunity. The last quarter of 2024 will be crucial. If Middle East tensions worsen, gold’s rally could accelerate,” said Jigar Trivedi, Senior Research Analyst – Currencies & Commodities at Reliance Securities.
Similarly, ongoing speculation about a recession or slowdown in the U.S. economy could drive the yellow metal even higher. Uncertainties surrounding the U.S. election outcome also add to the bullish potential, he added.
With the ongoing speculation around the Middle East crisis and the US economy, combined with the technical performance of the metal, the upside looks capped at Rs 80,000/10 grams.
“However, predicting geopolitical developments is challenging. A de-escalation in conflicts could lead to a correction in gold prices as the safe-haven demand diminishes. Moreover, if the U.S. economy shows signs of recovery, such as improved consumer confidence, job creation, lower inflation, increased household spending, and a rebound in manufacturing activity, the fear of an economic slowdown may ease, resulting in a significant drop in gold prices,” Trivedi cautioned.
“A consolidation phase in prices is expected in prices ahead of US general elections amid dampening expectations of further 50 bps rate cuts in November may keep sharp upside limited in the near term,” said Naveen Mathur, Director – Commodities & Currencies at Anand Rathi Shares and Stock Brokers.
However, it is noteworthy that higher prices are expected to limit the volumes in physical markets despite the start of the festive season in India.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
