Gold prices near one-month high; should you buy the yellow metal?

Gold prices are hovering near a month’s high, having climbed sharply from their recent lows. The rising tensions between the US and China have given a leg-up to the yellow metal.

However, upbeat jobs data in the US, recovery in the dollar and firm bond yields dented the bullion’s appeal. Traders are also awaiting the inflation numbers from the world’s largest economy.

Hareesh V, Head of Commodities,

said geopolitical worries and weak economic activities across the globe are the key reasons that pushed the gold prices higher.

He added inflation numbers would decide the future course of action by the Federal Reserve in terms of rate hikes to curb inflation amid the ongoing economic slowdown.

Gold is considered to be a hedge against inflation, but tends to lose its appeal when currency and bond yields rise as the bullion yields nothing on its own.

Renisha Chainani, Head of Research, Augmont Gold, said, “Slump in the US business activity is the key catalyst to support the bullion. Contraction in the US GDP for the second straight quarter is increasing the probability of a hard landing.”

Prithviraj Kothari, Managing Director, RiddhiSiddhi Bullions said gold prices have accelerated their recovery in recent days, rising strongly. “Gold is supported by a weaker US dollar, lower bond rates following the Fed’s latest decision.”

Market experts are positive about the yellow metal in the near term as they see more upside in gold in the near term. Even in the long run, gold appears to be a decent bet and one should accumulate the precious metal on dips, they added.

Chainani from Augmont Gold said if gold sustains above Rs 51,500, it can hit Rs 53,000 this month, whereas Kothari said one should accumulate gold through SIP for a target of Rs 55,000 by this year-end.

Recovery in the rupee and increased taxes on the import have supported gold prices in India, said market analysts.

“In the near term, gold prices are likely to remain range bound,” said Hareesh V from Geojit. “In the long run, the yellow metal has a potential to deliver solid returns.”

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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