Gold prices surge by ₹2,000 this week! What's fueling the ascent and how to navigate the market now?
Gold prices in the domestic futures market experienced a positive week, defying the evening sell-off. On Friday, gold prices settled at ₹123,400 on the MCX, a 2.64% decline, influenced by hawkish remarks from US Federal Reserve officials. Despite this, gold managed to climb over ₹2,000, or nearly 2%, for the week.
The recent upward trend in gold has rekindled investor hopes, suggesting a potential rebound to its all-time high of ₹132,000 after a month-long range-bound period. Justin Khoo, Senior Market Analyst at VT Markets, attributes this renewed momentum to structural central bank demand and heightened geopolitical tensions.
What's driving gold prices this week?
Analysts suggest that economic data releases following the US government shutdown, the longest in history, could be a significant catalyst for gold. The shutdown, which ended on Thursday, created a data gap, leaving the Fed and traders uncertain ahead of the upcoming policy meeting. Manav Modi, a Precious Metals Analyst at Motilal Oswal Financial Services, notes that weak economic data expectations post-shutdown are supporting gold prices. Additionally, a brief profit-taking and a notable increase in Shanghai gold inventories are contributing to the upward trend.
Central banks have been substantial buyers of gold, acquiring over 1,000 tons annually in 2022 and 2023, and this trend continued in 2024. Major emerging market economies like China and Poland have been key purchasers. Early projections for 2025 indicate sustained accumulation in the range of 750-950 tons, providing a robust demand foundation even at elevated prices.
However, high volatility due to government data releases and uncertainty surrounding the Fed's rate trajectory cannot be ruled out.
Gold investment strategy
Given the volatile nature of gold, analysts advise against attempting to time the market's peaks. Instead, they recommend using dips as buying opportunities.
Khoo suggests, "With gold at record highs and supported by long-term de-dollarization trends, investors should maintain optimism but exercise restraint. To mitigate risk, avoid chasing highs and instead accumulate during 2-3% declines."
Modi also advises investors to secure some profits near recent highs and wait for price dips to accumulate for the next upward phase. He highlights that ₹1,18,000-1,20,000 serves as a strong support level, while ₹1,30,000–1,37,000 are potential medium-to-long-term targets on the domestic front.
Disclaimer: This information is for educational purposes only. The opinions and recommendations expressed are those of individual analysts or broking firms, not Mint. Investors are advised to consult certified experts before making investment decisions, as market conditions can change rapidly and circumstances may vary.
