Gold Price Prediction: Analyst Foresees Long-Term Uptrend Despite Short-Term Volatility
Gold prices are likely to resume their upward trajectory over the long term, according to Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers. He highlights key factors influencing gold prices in the coming days, noting that the precious metal ended last week with a marginal gain amid mixed signals from US macroeconomic indicators.
US Economic Data and Its Impact on Gold
Softer January Consumer Price Index (CPI) figures reinforced expectations that the Federal Reserve could cut interest rates later this year, providing some support for gold. The US CPI rose 2.4% year-over-year in January, slowing from 2.7% in December and coming in below the forecast of 2.5%. On a monthly basis, consumer inflation moderated to 0.2%, down from 0.3% previously and under market expectations of 0.3%.
Meanwhile, US Nonfarm Payrolls released last week increased by the most in over a year, while the Unemployment Rate unexpectedly declined, pointing to a stabilizing labor market. This mixed data, combined with profit-booking by ETF investors and strong US macroeconomic performance, has capped gold's upside in the current week.
Asian Market Dynamics and Demand Factors
Overall physical demand from India and China remains mixed. In China, authorities in the retail hub of Shenzhen have issued warnings against illegal gold-trading activities, including apps offering leverage to retail investors and online live streams promoting bullion sales. This comes amid frenetic demand for precious metals in recent months.
China market holidays and profit-booking moves are expected to keep bullion sentiment muted in the current week. However, dip buying interest could emerge from lower levels in the coming weeks, providing potential support for prices.
Weekly Price Outlook and Market Movements
Spot Gold (current market price $4,937 per ounce) is likely to remain range-bound, with possible dips towards $4,790 – $4,750 per ounce. Spot Silver (current market price $74.75 per ounce) could dip towards $68 – $70 per ounce over the next one to two weeks.
Gold prices have experienced choppy trading after regaining ground towards $5,000 in February, partly due to thin trading volumes as China and some other Asian markets remain closed for public holidays this week. Profit-taking after a previous 2.5% surge seen last Friday has also contributed to the decline.
Market movements this week could remain influenced by holidays in China and other Asian markets, amid anticipation of future rate adjustments. Additionally, Asian currencies like the yen have seen gains, but the yen's weakening trend may persist unless the Bank of Japan adopts a more aggressive rate policy.
Geopolitical and Macroeconomic Factors
Traders are closely watching renewed nuclear negotiations between the US and Iran, along with US-led efforts to end the war in Ukraine, both set to resume later in Tuesday's session. Any setbacks in these talks could sway risk appetite and safe-haven flows towards gold.
Macro cues from the US, including data on GDP and Personal Consumption Expenditure (PCE) inflation numbers, combined with Fed meeting minutes scheduled today, are expected to keep price direction range-bound in the near term.
Long-Term Outlook and Drivers
On a longer-term basis of one to two months, expectations remain for gold to resume its upward trend. The drivers behind a multiyear rally are still in place, including:
- Geopolitical tensions
- Questions over the Federal Reserve's independence
- A broader shift away from traditional assets such as currencies and sovereign bonds
These factors could drive gold towards $6,000 per ounce in the second quarter of the year.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
