Gold Prices Extend Gains for Third Consecutive Week: Is it Time to Invest?

Gold Prices See Significant Increase on MCX

On March 20, the Multi Commodity Exchange (MCX) witnessed a notable surge in gold prices, with the April contract rising by ₹1,914 (1.32%) to ₹1,46,868 per 10 grams.

The uptick in domestic prices is attributed to a recovery in market sentiment, driven by reduced geopolitical tensions in West Asia. Analysts point to hints of the US easing sanctions on Iranian oil, which could enhance global supply and lower risk premiums. As a result, safe-haven demand has decreased, facilitating a technical recovery in prices.

Global Market Update

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In the global market, spot gold increased by 0.6% to $4,675.23 per ounce, while US gold futures for April delivery rose 1.6% to $4,676.90. However, despite this slight increase, gold prices have fallen over 6% this week, marking a third consecutive week of declines and a drop of more than 10% since the intensification of the US-Israel-Iran conflict in late February.

Factors Contributing to Gold Price Decline

The appreciating US dollar, which has risen over 2% this month, has become a key safe-haven asset, restraining increases in gold prices. Additionally, the Federal Reserve's cautious stance on inflation and interest rates has reduced expectations for imminent rate cuts, putting pressure on prices. Demand trends in physical markets have also reflected this subdued sentiment, with gold discounts in India decreasing slightly due to festive purchases and premiums in China falling in response to lower consumption.

Market Outlook

Read also: Gold and Silver Prices in India: A Review of Current Rates Across Major Cities

Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund, believes that the current selloff in gold is being misread by the market. According to Gulati, gold's decline is not due to a breakdown in the bull case, but rather a response to a leveraged paper market flushing positions in a rising rate, rising oil environment.

Gold Price Outlook

Jigar Trivedi, Senior Research Analyst - Currencies & Commodities, IndusInd Securities Ltd, notes that markets have pushed back expectations for Fed rate cuts to 2027 and are pricing in two rate hikes each from the ECB and BOE this year, further weighing on gold's appeal. MCX Gold has breached Rs. 150,000/10g psychological support, and Trivedi recommends shorting on every bounce.

Investment Strategy

Mohit Gulati advises accumulating gold during dips, as the trade has become crowded. He sees the $4,500-$4,700 zone as a compelling entry point for those who missed the rally. Gulati remains bullish on gold, citing the $2,600-$5,500 price range in the past 12 months as a testament to the metal's potential for further growth.