Gold prices in India are poised for an upward trajectory, bolstered by a persistently weak rupee and supportive global factors, according to a leading market analyst. Praveen Singh, Senior Fundamental Research Analyst for Currencies and Commodities at Mirae Asset Sharekhan, states that the domestic market is well-supported for a rally.
Global Market Dynamics and Fed Impact
Spot gold exhibited volatility on December 15, trading between $4285 and $4351 as traders adopted a cautious stance ahead of key US jobs data. The metal faced resistance near the $4353 level, which was its peak since October 21. By the latest readings, it was holding steady around $4304.
The previous week saw a significant surge of 2.5%, with gold closing at $4302. This rally was primarily fueled by a dovish turn from the US Federal Reserve. In its December 10 meeting, the Fed cut the benchmark rate by 25 basis points to a range of 3.5%-3.75% and announced a plan to purchase $40 billion in US Treasury bills each month for several months.
However, some gains were pared on Friday following mixed commentary from various Federal Reserve officials regarding the future path of monetary policy.
Economic Data and Geopolitical Factors
A slew of economic indicators released recently painted a mixed global picture. Data from China on December 16 disappointed markets, showing a 0.39% drop in new home prices for November—the 30th consecutive monthly decline. Retail sales growth slowed to a mere 1.3%, missing forecasts, while industrial production and fixed asset investment also underperformed.
In the US, the December Empire State Manufacturing Index unexpectedly plunged to -3.9 against an expectation of 10. The NAHB Housing Market Index, though at a seven-month high of 39, remained below the 50 threshold, indicating that builders retain a pessimistic outlook.
On the geopolitical front, negotiations in Berlin over the Ukraine conflict showed some progress, with officials optimistic about reaching an agreement. However, the critical issue of territorial disputes between Ukraine and Russia remains unresolved, continuing to provide a floor for safe-haven assets like gold.
Investment Flows and Regulatory Developments
Investment demand for gold remains robust. Global gold Exchange-Traded Fund (ETF) holdings reached 98.33 million ounces as of December 12, marking the highest level since late October. Holdings have increased for three consecutive weeks, with a year-to-date inflow of approximately 482 tonnes. Notably, the last two weeks alone saw net inflows of around 25 tonnes.
Meanwhile, registered COMEX gold inventory stands at 18.95 million ounces. While this is the highest since early February, it represents a significant 21.88% decline from the record high noted in April, suggesting a shift towards physical ownership in uncertain times.
In a significant development for the Indian market, the Pension Fund Regulatory and Development Authority (PFRDA) is planning to allow National Pension System (NPS) funds to invest in gold and silver ETFs. This could channel a portion of the NPS's massive $177 billion corpus into precious metals.
Furthermore, Zimbabwe, which has accumulated 4.02 tonnes of gold, announced plans to launch its own gold ETF by June.
Outlook and Key Levels to Watch
According to Praveen Singh, spot gold is well-positioned to extend its rally amid a dovish Fed policy stance and ongoing geopolitical concerns. The subdued US dollar adds to the metal's attractiveness. The outlook remains positive unless the upcoming US nonfarm payrolls data for October and November, due on December 16, comes in significantly stronger than expected.
Fed Chair Jerome Powell's expressed concerns about the US job market and the potential for substantial downward revisions in job data since April are seen as supportive factors for gold.
Key technical levels identified are: Support at $4245, $4230, and $4183. Resistance is seen at $4354, followed by the all-time high near $4382, and further at $4500. The analyst suggests maintaining long positions with a strict stop-loss strategy.
For Indian investors, the domestic gold price finds additional support from the extremely weak rupee, which is under pressure from tariff-related woes. India's gold imports in November stood at $4.02 billion.
Market participants will also closely monitor the US Consumer Price Index (CPI) report for November, scheduled for release on December 18, for further direction on inflation trends and monetary policy.
