Gold Prices See Sharp Correction, Experts Weigh In
The recent sharp correction in Gold prices, where the yellow metal has corrected by nearly Rs 3000 per 10 gram or 4% from the lifetime high is its biggest fall in nearly two years. Can we expect the trends to reverse or a top has been made? This is what multiple experts tell ETMakets as they spell out their trading strategy.
Gold Rally and Recent Fall
Notwithstanding the fall seen in yellow metal over the last two weeks, the rally in gold this year so far has been nothing short of spectacular. Gold futures on the MCX have climbed nearly 13% or Rs 8,000 per 10 gram on the year-to-date basis. The gains had been primarily on geopolitical tensions increasing the safe haven appeal of gold along with hopes of an early rate cut that triggered movement in the first fortnight of April. The month-to-date price rise still stands at 6%.
However, the tables have turned with US inflation moderately rising in March and dashing hopes of a rate cut by June.
Insight: The recent fall in gold prices indicates a shift in market sentiment due to rising inflation and economic data from the US. This correction could present buying opportunities for investors looking to enter the gold market at lower prices.
Expert Opinions on Gold Price Trends
Jigar Pandit, Head Commodity & Currency Business, Sharekhan by BNP Paribas, stated, “Gold recorded its first weekly decline in six weeks and its biggest fall in two years as expectations of Fed rate cuts faded after the latest economic number from US.”
Pranav Mer, Vice President, EBG – Commodity & Currency Research at JM Financial Services, opines that gold prices have formed a short-term top and expects some more correction towards Rs 69,000-69,500 levels in the near-term.
Anuj Gupta, an analyst, also sees further corrections in gold prices in the upcoming month amid consolidation in the yellow metal.
Insight: Analysts are cautious about short-term gold price movements but remain optimistic about the underlying trend and long-term prospects of gold due to various supporting factors like central bank demand and geopolitical risks.
Seasonality and Price Outlook
In April 2021, gold yielded 4.70% returns, with April historically showing positive returns for gold. Gupta of HDFC Securities mentioned that May is likely to be a consolidation phase for gold based on historical trends.
Gold Price Outlook for 2024
Pandit maintains a long-term target of $2,700 for 2024 in the international market and Rs 76,000 on the MCX by the end of the year.
Gupta estimates a target of Rs 75,000 for this year, emphasizing strong long-term prospects for gold driven by central bank demand and geopolitical risk premiums.
Mer sees prices hitting the Rs 74,000-74,500 mark by the end of the year.
Insight: Despite short-term corrections, experts remain positive about the long-term outlook for gold prices, citing various factors that could drive prices higher in the coming months.
May Strategy for Investors
Experts suggest that prices are likely to consolidate in May, with trading ranges predicted between Rs 69,500 and Rs 72,500. Mer recommended a short-strangle strategy for investors.
Gupta advised investors to treat corrections as investment opportunities and wait for further corrections before entering long positions as swing traders.
Insight: Investors are advised to monitor gold prices closely, considering the potential for consolidation in May and using corrections as opportunities to enter or add to their positions.
In conclusion, while short-term uncertainties may cause fluctuations in gold prices, the long-term outlook remains positive due to ongoing demand drivers and market dynamics.
