Gold Prices: Yellow Metal To Trend Higher Owing To Geopolitical Risks In Middle East

Gold have witnessed substantial upside in the past two weeks, and on Tuesday, the prices of precious metal in India has increased in both standard gold and pure gold. The latest rise is fuelled by high gold demand amidst Dussehra festival, which offset downside of the previous day. Yellow metal is expected to trend higher in the immediate term on the backdrop of geopolitical uncertainties.

On October 24th, 22-carat gold is up by Rs 200 to Rs 56,500 per 10 grams compared to previous day's Rs 56,350 per 10 grams. Meanwhile, 1 gram to 100 grams of 22-carat gold has climbed in the range of Rs 20 to Rs 2,000 respectively.

Also, 24-carat gold surged by Rs 240 in 10 grams to Rs 61,690 as compared to Rs 61,450 of the previous day. Meanwhile, pure gold in 1 gram to 100 gram soared by Rs 24 to Rs 2,400 over the previous day.

On Monday, Kotak Institutional Equities said that comex gold prices eased as US treasury yields surpassed 5% for the first time since 2007, as fears eased over the weekend that Middle East tensions could boil over to become a conflict involving major powers. Still, tensions remained high as Israel warned that Iran-backed Hezbollah risks dragging neighboring Lebanon into war and said it responded after anti- tank missiles were fired from Lebanon.

But last week, gold closed near four-month high, recording second consecutive weekly gains. In the trading week that ended on October 20th, spot gold zoomed by 2%.

Currently, spot gold is near $1,980 per ounce level, and the US gold futures expiring in December was performing near $1,992 per ounce. At home, MCX gold futures settled near Rs 60,600 per 10 gram. Market is closed on Tuesday for MCX due to the festival.

Yellow metal is expected to rise ahead.

According to Emkay Wealth Management, considered as safe haven especially in times of geopolitical uncertainty, gold is expected to trend higher in the immediate term. Technically the price targets for gold remains at US$ 1990 and US$ 2030. Contrary to the usual trend of gold moving up significantly in the weaker dollar scenario, the safe haven status has assumed significance despite a strong dollar scenario.

Emkay further explained, the on-going Middle East conflict has impelled investors' preference for Gold which has resulted in upward price mobility in the asset class. Gold prices have remained well supported at the US$1880 and US$1860 levels.

The tension in the Middle East continues to worsen with thousands of lives lost, and no signs of peace between Israel and Gaza anytime soon. An assault that began from Gaza's militant group Hamas on October 7th, killing thousands of Israelis, has led to a full-fledged war declaration from Israel.

The Israel-Hamas war is expected to be fuelled on wider regions with Lebanon, Iraq and Syria also clashing with the Jewish majority region.

Taking a perspective before the situation of conflict arose, despite persistent inflation across all major economies, Emkay's note aded, "gold was not able to rise much because with inflation came extremely hawkish monetary policy which pushed interest rates higher. The rise in money market yields made currency yields attractive and this has resulted in gold moving sideways most of the time. But the more interesting fact is that gold prices have not broken through any key support levels convincingly in the last three months."

On the supply front, Emkay said, the expectation is that fresh supply from the mines as well as of used gold will be relatively high.

The brokerage lastly added, "We also expect continued demand from central banks. An easing monetary policy stance projected to come into effect in mid-2024 which will help bring an incremental value to the investors taking long positions." from now.

Disclaimer:

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