Israel-Iran war: Gold price retraces from record high on US dollar rebound. Should you buy?

Gold rate today: The yellow metal price in the domestic market appreciated despite profit-booking in spot gold prices. MCX gold rate finished 0.60% higher last week at ₹76,190 per 10 gm, whereas the spot gold price descended 0.40% and closed at $2,653 per troy on\unce. According to the commodity market experts, this could become possible due to weakness in the Indian National Rupee (INR) against the US dollar rate. They said that INR depreciated around 0.40% against the USD, which fueled gold prices in the domestic market. 

However, a rebound in the US dollar rates in the Forex market triggered profit-booking in the international bullion market. However, they maintained that geopolitical tension in the Middle East, especially the Israel-Iran war, may continue to support gold prices at lower levels, and they expected a sharp upside in the yellow metal rates if the Iran-Israel war is prolonged.

Triggers for gold prices

Highlighting the triggers that dictate gold prices in the domestic and international market, Sugandha Sachdeva, Founder of SS WealthStret, said, "Gold prices have shown modest gains in domestic markets, rising by around 0.60%, while they experienced a slight decline of around 0.40% in international markets during the week. This divergence is primarily due to the depreciation of the Indian rupee, which fell by about 0.40%, boosting domestic gold prices despite the global downturn."

On what is dragging gold prices from the higher levels, Sugandha Sachdeva said, "A significant factor limiting further upside in gold has been the rebound in the US dollar index, which recently reached a one-month high. Additionally, the stronger-than-expected US employment report for September, which saw 254,000 jobs added compared to forecasts of 147,000, has cooled speculation about further aggressive rate cuts by the US Fed. The unemployment rate also dipped to 4.1%, lower than the expected 4.2%. These positive economic indicators have reduced the likelihood of substantial monetary easing, making gold less attractive than the strengthening dollar."

Iran-Israel war in focus

"Gold's safe-haven appeal has been strengthened by escalating geopolitical tensions in the Middle East, contributing to its recent upward movement. However, the precious metal faces strong resistance at the $2,680 per ounce mark in international markets and Rs.76,600 per 10 grams in domestic markets," said Sugandha Sachdeva of SS WealthStreet.

Advising buy-on-dips strategy amid escalating Israel-Iran war tension, Praveen Singh – Associate VP, Fundamental Currencies and Commodities at Sharekhan by BNP Paribas said, "Gold price is expected to range trade ahead of the crucial US nonfarm payroll report (September). The report may throw an upside surprise, so the yellow metal may gravitate towards $2,650 before the data release. Overall, gold is confined to $2,620 to $2,685 for the want of a catalyst."

On the outlook for gold price today, Sugandha Sachdeva said, "Looking ahead, geopolitical risks continue to loom large, keeping investor interest in gold alive. Israel's potential for retaliatory actions following recent Middle Eastern conflicts could drive further demand for the metal as a hedge against uncertainty. The price pattern indicates that gold prices have found a solid support base in the ₹75,200 to ₹75,000 per 10 gm range, likely attracting buying interest at lower levels. If prices break above the critical resistance of ₹76,600 per 10 gm, they will likely traverse on the higher incline toward ₹78,000 per 10 gm in the near term.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.