Mumbai, Nov. 7: Motilal Oswal Financial Services predicts that in the medium term, demand for safe haven assets owing to unease about the Israel-Hamas conflict and the holding on of interest rates by central banks globally would push gold prices to as high as Rs. 63,000 per 10 grams.
“Gold had a roller coaster ride this year, offering opportunities to both bulls and bears as well as low prices for long-term investors. Major central banks’ aggressive rate rises momentarily removed bullion’s luster. Even yet, the Motilal Oswal research notes that recent geopolitical concerns and predictions of a change in the present monetary policy stance supported gold prices strongly.
The precious metal is undoubtedly facing challenges, including rising real rates, predictions of a soft landing, more rate rises, and a reduction in geopolitical tensions. The research claims that risk premiums, such as those associated with the most recent Israel-Hamas conflict and the Russia-Ukraine war, are valued in gold.
Gold prices may be affected by the US Federal Reserve’s ongoing hawkish posture and/or a relaxation of the Middle East conflict. Nevertheless, the research notes that the aforementioned variables can cause a longer-lasting hangover and keep the celebration going for gold bulls, guiding it toward a medium objective of Rs. 63,000.
Sharp fluctuations in the dollar index and yields, central bank policies, geopolitical unpredictability, the argument between a hard and soft landing, increased interest in risky assets, and these factors have all contributed to this year’s dramatic swings in gold and silver prices.
The policy stance of the Central Bank and geopolitics have taken center stage among the aforementioned factors. Gold reached a near-record high of $2,070 at the beginning of the year, then fell to lows of $1,800, and is now back above $2,000, the research notes, indicating the extreme volatility seen so far.
Traditionally, demand for gold spikes over the holidays. However, in recent times, demand patterns have sharply changed, with market players choosing to invest anytime there is a decent correction in the price of a deal. The gold bullish tale is driven by far too many storylines, and the explanations for these narratives alternate often. There is, however, one thing that is certain: if you had made an investment in gold at Diwali 2019, by this Diwali you would have been sitting on 60% returns on your domestic gold assets.
In comparison, domestic Gold ETF average returns over a comparable time period are around 55% and 15%, respectively, for SPDR Gold shares, which have shown 30% and 10% increases over a 5- and 1-year horizon, respectively, the research said.