Due to the bank crises in the US and Europe and concerns over a slowdown in the economy, gold prices had the best return of any asset class in the first quarter of the current year (CY) 2023. On the MCX, gold prices surged from about $54,975 per 10 gm to $59,371 per 10 gm levels during January to March in CY23, registering a jump of almost 8% in the most recent quarter ending in March 2023. The yellow metal finished higher for the second consecutive quarter in quarter-to-quarter (QoQ) comparison.
Gold prices are currently encountering opposition on the international spot market above $2,000 per ounce levels, according to commodity market specialists, while on the MCX, gold rates have immediate barrier at levels of 60,600 per 10 gm. They claimed that gold prices were still rising and that a new leg of the precious yellow metal’s advance might start if these resistance levels in the domestic and global markets were broken.
Factors driving up the price of gold
Sugandha Sachdeva, a market expert, said why gold prices are growing these days: “Gold prices showed a stunning surge in March and remained one of the best-performing assets in the first quarter of this year, gaining by over 8%. Prices stayed in the positive region for the second straight quarter, reflecting a flurry of purchasing. The metal regarded as a safe haven has seen its price rise as a result of expectations that the US Fed will take a more dovish stance, continuing inflation concerns, worry about a slowdown in global growth momentum, and robust central bank buying.
Sugandha continued by stating that worries about the US bank crisis spreading abroad and the turbulence in the financial markets had increased interest in gold, which was seen as a hedge against any economic or geopolitical turmoil. The continuation of an increasing trend was further driven by weakness in the dollar index, which weakened for the second consecutive quarter.
In anticipation of the US Fed remaining dovish on interest rate hikes, Investors are hoping that the Fed will now be lenient on interest rate hikes, bolstering the demand for safe havens, as the US economy is under pressure, according to Nirpendra Yadav, Senior Commodities Research Analyst at Swastika Investmart. He continued by saying that as China’s economy continues to thrive following the end of the COVID-19 restriction regime, there is a rising physical demand for gold.
The Shanghai Gold Exchange reported that gold withdrawals rose by 76 tonnes year over year, reaching their highest level since 2014. The increase in gold withdrawals from exchanges is a sign of significant wholesale market demand. After 2018, China reported importing the most gold in 2022. Beginning in November and continuing through February, the People’s Bank of China made official gold acquisitions. According to Nirpendra Yadav, an increase in the gold premium in Shanghai and London suggests continued strength.
Forecast for gold prices
According to Sugandha Sachdeva, who provided an assessment for the price of gold in the near future, “the overall price setting still implies further opportunity for upside in the precious metal in the long term given that the rates are anticipated to max out very soon, which may be a benefit for gold prices, but purchasing on some drops would be the proper strategy.”
“When looking at the short-term picture, prices appear vulnerable to risks of profit-taking, with the $2000 per ounce mark functioning as a significant barrier in the international markets and the Rs. 60600 per 10gm mark remaining a short-term obstacle in the June contract. Prices would only spike further if they made a strong move past these crucial levels. Sugandha concluded: “Gold prices may succumb to some selling pressure in the next days, with support predicted at Rs. 58000 per 10gm line and then Rs. 56700 per 10gm mark. Concerns over the US banking sector have diminished, and there has been a resumption of “risk on” activity in the global markets.
Will the price of gold reach a new peak?
In the near to medium term, we anticipate that the gold price will rise to a new peak. Anuj Gupta, Vice President — Research at IIFL Securities, stated that the price of gold on the MCX has immediate support at $1,960 levels, while the price of the precious yellow metal on the international spot market has considerable support at $1,945 levels. We anticipate a new leg of the precious metal’s advance now that the Dollar Index has fallen below 102 and may breach its present support level at 100. The price of gold may fluctuate between $1,990 and $2,020 per ounce in the near future. If it maintains above $2,020 per ounce, however, we can anticipate it to first touch $2,050, then $2,100, and then $2,200 levels before surpassing its current lifetime high of $2,075 per ounce.