IGI Logo

Emkay Wealth Management, the wealth management and advisory arm of Emkay Global Financial Services have released a note on gold, price outlook, and the reason for the rally in the precious metal prices given the current setup.

After trading in a narrow range, the gold prices have gained ground in the past 2-3 weeks. Gold prices are trading at a 4-month high, it has managed to cross the $1800/oz level. Gold prices broke above the 1720 level after creating a base around the 1630-1640 levels. The major reason for the rally in the yellow metal is the commentary by the Fed indicating their dovishness on the monetary policy. Gold prices may trade in higher ranges with 1730-1740 as the base, and could target 1830 and 1860. 

Though we witnessed a rally in gold prices, the same may be restricted due to the future rate hikes. The interest rates in the US is still not at its peak. The Fed may continue to hike rates well into 2023 as the inflation is still at 8% level, and far off the target of 2%. Other global central banks hiking rates may also restrict gold price rally. Also, in a scenario of rising dollar, it is less likely that gold would be able to make much headway to higher levels. But a moderation in central bank rate hikes could be beneficial for the yellow metal. But that be sometime from now.

Gold demand is reported to have been on a firmer footing in Q3 of this year. The demand came mainly from central bank buying, amounting to 400 tonnes for the quarter and retail consumers. The easing of covid related restrictions in China helped push up demand in China and retail jewellery demand in India too supported the markets. Jewellery consumption rose to 523 tonnes, a 10 % year-on-year rise despite the adverse sentiment. Overall demand growth was 28% on a Y-o-Y basis.  But the 227 tonnes of ETF outflows reflected the underlying weak sentiment.  

Above views are of the author and not of the website kindly read disclaimer