After hitting Rs 53,000, is gold headed for new highs or profit booking on the cards?

New Delhi: Gold prices climbed to Rs 53,000 per 10 grams this week before retreating marginally. The yellow metal has been in demand lately, rising from Rs 50,000 per 10 grams in the last four weeks.

After a Rs 3,000/10 gms rally, the yellow metal is marching towards its record highs of around Rs 56,200 in August 2020. However, these levels will require another rally of the same momentum.

According to market analysts, peaked inflation in the US, prospects of a less aggressive Fed hike and a cooled-down dollar index are the key reasons supporting the latest rally in the bullion.

Before this, gold prices were supported by the geopolitical crisis due to the Russia-Ukraine war, soaring crude oil prices and a rally in other commodity prices Pritviraj Kothari, Managing Director, RiddhiSiddhi Bullions (RSBL), said that fundamentals are turning positive for gold, as lower US CPI print has changed Fed’s monetary stance from hawkish to dovish, pushing prices higher.

Rahul Kalantri, VP-Commodities, Mehta Equities, said that gold prices have been on fire for the last couple of weeks as US inflation is cooling due to the dollar and bond yield.

Amid the buzz of the new record highs for the yellow metal, analysts remain sceptical about the continuation of this rally. The majority of them suggest that gold is prone to some profit booking in the near term.

“We may see gold rallying albeit for a short term,” said NS Ramaswamy, Head of Commodities, Securities. It will be followed by profit-booking as the expected rate hike of 50 bps in December is already factored in the recent rally,” he added.

However, Kothari from RBSL has a different opinion on the yellow metal, as he expects new highs if gold breaches the psychological highs. When the US Fed will pause raising rates in 2023, safe-haven money will flow into gold.

“Central Bank gold demand is already strong from the last few quarters. Physical demand and gold ETF demand will follow rising prices in 2023,” he added.

Though, analysts said that profit-booking in the short run can’t be ruled out following a steep recent rally amid volatility in the global markets.

Short-term traders can book profit here and buy again on dips, while long-term investors can continue to hold for higher price targets, suggest the analysts.

“We suggest short-term investors and traders book profit in gold around $1,780-$1,800, which turns out to be Rs 53,500 in rupee terms,” said Tapse from Mehta Equities.

Ramaswamy from Ventura said that gold might see a fresh rally as the dust settles in Q1 of 2023, and the long-term investors must push the throttle for the bull run and higher gains.

Reading the technicals, he said that gold might correct to Rs 51,500-51,200 in the coming weeks. “Technically, it’s an exhaustion in gold prices. RSI and other indicators signal gold in an overbought zone,” he added.

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