Gold price rebounds as US dollar retraces from two month high. Should you buy after withdrawn of ₹2000 currency?

Gold rate today: On account of profit booking in the US dollar after US Fed chair suggesting an end to the monetary tightening cycle and announcement of ₹2000 currency withdrawal in India, gold prices bounced back strongly in international and domestic markets. Gold future contract for June expiry on Multi Commodity Exchange (MCX) gained ₹667 per 10 gm or around 1.12 per cent on Friday and finished at ₹60,390 levels. In international market, gold price finished at around $1,977 per ounce levels, logging an intraday gain of near one per cent.

Likewise, silver price on MCX gained over ₹1,200 per kg on Friday and ended at ₹73,350 levels, logging intraday gain of 1.67 per cent on the weekend session. In international market, silver price finished at $23.845 per ounce levels after climbing to an intraday high of $24.010 per ounce levels. After climbing to two month high during Thursday deals, US dollar witnessed some profit booking on the weekend session after halt in US debt ceiling talks. Dollar Index came close to 103 levels after skyrocketing close to 104 levels on Thursday.

₹2000 note withdrawal

Expecting gold price to continue uptrend in domestic market, Anuj Gupta, Vice President at IIFL Securities said, “After the announcement of ₹2000 currency withdrawal in India, people who have ₹2000 tenders are expected to convert those tenders in physical gold pushing demand for the yellow metal in India. Hence, demand-supply constraint is expected to provide support to the precious metal and hence every dip should be seen as buying opportunity by gold investors.”

Anuj Gupta of  IIFL Securities said that gold price premium in physical market may also rise from ₹1,500 to ₹2,000 per 10 gm in Delhi and other retail bullion market against MCX gold price.

US Fed in focus

On reasons for rally in gold rates today, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, "This recovery was primarily triggered by remarks from the Federal Reserve Chair, suggesting an end to the monetary tightening cycle due to challenges within the US banking sector. Moreover, negotiations regarding the US debt ceiling limit were temporarily halted, reviving concerns about a potential US default, which prompted investors to seek the safety of gold. Some softness in the greenback also underpinned gold prices."

On why gold and silver prices witnessed selling pressure last week, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, "Gold prices remained under pressure at upper levels for two consecutive weeks and declined by more than ₹2000 per 10 grams from its highest levels as the Joe Biden administration was highly optimistic about the possible solution to the US debt ceiling crisis. It was expected that its limit will be increased, which reduced the ongoing uncertainty regarding the debt ceiling and put pressure on gold and silver prices."

"Dip in precious metal prices before Friday rally can be attributed to the strength of the dollar index and robust US retail sales, industrial production and strong labour market indicators. Additionally, the optimism surrounding a potential agreement among US lawmakers to prevent a debt default diminished the demand for gold as a safe haven," Sugandha Sachdeva of Acme Investment Advisors said.

Gold price outlook

On outlook for gold price in near term, Sugandha Sachdeva said, "Looking ahead to the coming week, the level of ₹59,500 or $1,950 per ounce will serve as a strong support zone. Any price dips can be construed as buying opportunities, as long as this support level holds. On the upside, gold price may encounter resistance around the key level of ₹61,500 per 10 grams. Only a decisive advance above this level would indicate a further upward momentum in the days to come."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.