GOLD NEAR RECORD HIGHS: HOW FAR CAN PRICES RISE?

Gold prices are trading near all-time highs. This is due to a weaker dollar and expectations of US interest rate cuts. On Monday, September 16, spot gold rose 0.2% to $2,580.81 per ounce.

It follows Friday’s record high of $2,585.99 per ounce.

In India, 24-carat gold was priced at ₹73,690 per 10 grams.

The rate increased by 2.52% over the past week. In the last 10 days, it rose by 2.87%.

What’s driving gold’s rise?

Weaker dollar

The dollar weakened by 0.1% on Monday.

A weaker dollar boosts demand for gold. This trend could continue with the Federal Reserve expected to cut interest rates soon.

Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, explained the recent price movements. “Gold futures have broken records, surpassing $2,600 per ounce. This is due to rate cuts from the ECB and a weak dollar index," he said.

He said gold’s support levels range between $2,550 per ounce and $2,562 per ounce. Resistance lies between $2,598 per ounce and $2,612 per ounce.

Federal Reserve’s rate decision

All eyes are on the US Federal Reserve this week. The Fed’s two-day policy meeting is expected to bring interest rate cuts.

Markets are pricing in a 52% chance of a 50-basis-point cut. There’s a 48% chance of a 25-basis-point cut.

Lower interest rates tend to benefit gold. This is because gold doesn’t yield interest.

Lower rates reduce the cost of holding gold.

Kalantri believes the Fed’s decision will keep gold prices high.

A weaker dollar will continue to support gold.

Safe-haven demand

Geopolitical risks are also pushing gold higher. Tensions in Ukraine and the Middle East are rising. US-China relations remain strained.

Gold is a popular choice for investors during global uncertainties.

Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, highlighted these risks. “Comex gold reached a new all-time high. This was driven by expectations of a Fed rate cut and geopolitical tensions. Gold’s safe-haven demand is likely to persist.”

Could gold reach $3,000 per ounce?

Some market experts are optimistic about gold’s future and believe it could reach $3,000 per ounce.

While this target is ambitious, the outlook is positive. A dovish Fed, a weak dollar, and geopolitical risks could push gold higher.

Peter McGuire, CEO of XM Australia, shared his insights on CNBC-TV18.

“The appetite for gold globally in the retail market has been strong. Central bank buying is at a record, and physical gold is expected to do well. I won’t be surprised if gold hits $2,700 per ounce by month-end," he said.

Investors are closely watching the Fed’s next move. Any signals of further rate cuts could drive prices even higher.

Short-term corrections may occur, but long-term trends favour gold.

Investment strategy: Buy on dips

With prices near record highs, experts suggest buying on dips.

This strategy allows investors to enter the market during short-term corrections.

“As long as the Fed signals rate cuts, buying gold on dips remains favourable. Support for gold is near ₹71,000 per 10 grams. Resistance is projected at ₹74,500 per 10 grams to ₹75,000 per 10 grams." Jateen Trivedi, VP of Research at LKP Securities said.

2024-09-16T04:31:21Z dg43tfdfdgfd