Gold Price Prediction: Analysts Urge Buying on Dips Amid Record Rally
Gold prices continue their upward trajectory, hitting fresh record highs this week. Senior analysts now advise investors to adopt a cautious strategy. Instead of chasing the current rally, they recommend buying on price dips for better entry points.
Record Gold Performance
Spot gold achieved a remarkable 4.61% gain last week, reaching $4510 by January 9. The momentum continued into Monday, with prices climbing to an unprecedented $4630. This surge reflects growing market concerns about geopolitical instability and potential threats to Federal Reserve independence.
At the time of reporting, spot gold traded at $4622, marking a daily increase of 2.48%. The MCX February gold contract followed this trend, rising 2.51% to Rs 142,306.
Geopolitical Tensions Escalate
Several international developments are driving safe-haven demand for gold. The US administration has expressed strong interest in Greenland, citing strategic security importance. This stance has created friction within NATO alliances, with European nations discussing countermeasures.
Germany and the United Kingdom are reportedly planning increased military presence in Greenland. Germany will propose a joint NATO mission for Arctic protection, while the UK urges enhanced security measures in northern regions. Most Greenland residents oppose US control and support independence from Denmark.
Meanwhile, tensions with Iran continue to simmer. The US President indicated potential action before planned talks, citing rising casualties and government crackdowns on protests. Human rights organizations report at least 572 fatalities during recent demonstrations.
Federal Reserve Independence Under Threat
The US Department of Justice launched a grand jury investigation on January 9, targeting the Federal Reserve. This action involves subpoenas related to Chair Powell's testimony about expensive building renovations. The investigation threatens criminal indictment and raises concerns about central bank independence.
Powell responded strongly in a Sunday video statement, calling the investigation a pretext to undermine monetary policy autonomy. This represents the latest confrontation between the administration and the Fed over interest rate decisions.
However, bipartisan opposition is emerging against this investigation. Key Republican Senator Tillis vowed to block Fed nominations until the matter resolves. Democratic leaders Warren and Schumer condemned what they called abuse of legal processes to control the central bank.
Economic Data and Market Movements
Recent employment data showed mixed signals. January nonfarm payrolls increased by 50,000 jobs, falling short of the 70,000 forecast. The unemployment rate dipped to 4.4%, possibly reflecting fewer job seekers rather than strong employment growth.
The US Dollar Index declined 0.4% to 98.76 on Monday, responding to Fed independence concerns. Treasury yields showed modest increases, with two-year yields at 3.54% and ten-year yields at 4.18%. US equities recovered most intraday losses, ending only slightly lower.
Global gold ETF holdings stood at 98.95 million ounces as of January 9, showing minimal year-to-date changes. Markets now await upcoming economic indicators including:
- US CPI data on January 13
- University of Michigan Sentiment and inflation expectations
- PPI and retail sales data on January 14
Gold Price Outlook and Strategy
Analysts see potential for gold to reach $4706 or even $4803. However, bipartisan opposition to administration actions might alleviate some Fed-related concerns. Geopolitical risks appear more likely to provide sustained support for precious metals.
The recommended strategy emphasizes buying during price dips rather than chasing rallies. Immediate resistance levels appear at $4655, with support expected at $4550, $4500, and $4400.
Despite elevated risks, market appetite remains surprisingly healthy. Metal rallies show increasing correlation with risk assets, though with higher volatility. Yield movements have remained relatively muted despite Fed-related uncertainties.
Silver Market Update
Silver prices demonstrated even stronger performance, surging over 5% to record highs. Spot silver reached $86.21 during Monday trading, representing a 7.57% daily increase. The MCX March silver contract climbed 7% to Rs 270,423.
This follows last week's impressive 9.67% gain to $79.85. Global silver ETF holdings stood at 853.04 million ounces as of January 9, showing a year-to-date decline of approximately 10.50 million ounces.
Lease rates have moderated from recent highs, with one-month LBMA rates at 3.36% compared to previous levels above 7%.
Silver maintains positive momentum but appears extended at current levels. The metal moves in tandem with risk assets and industrial metals like copper, showing characteristics of momentum-driven buying.
While easing lease rates and ETF inflows provide less support, silver could potentially extend its rally to $87.30 or $89.33 unless disrupted by unexpectedly strong US inflation data. Support levels exist at $83.75 and $80.
Similar to gold, analysts recommend buying silver dips with appropriate stop-loss protection rather than chasing parabolic moves. The overall outlook remains constructive, though intermittent corrections are expected and considered healthy for sustained rallies.
Market recommendations and views expressed by analysts represent individual opinions and not institutional positions. Investors should conduct their own research before making financial decisions.
