Gold rate today under pressure as rupee hits four month high. Opportunity to buy?

Despite swift recovery from the one month low, gold price ended 0.30 per cent lower in the week gone by. The gold futures contract for February 2024 expiry on Multi Commodity Exchange (MCX) finished at 62,390 per 10 gm level on Friday, logging a marginal intraday gain of 28 per 10 gm. In the international market, spot gold price closed at $2,048 per ounce level.

Silver price on MCX finished at 72,573 per kg level whereas in the international market, the precious white metal ended at 23.18 per ounce level. According to commodity experts, pressure in bullions was caused by lower domestic demand due to the month of Kharmas and a rise in the Indian National Rupee against the US dollar (USD).

They said that the Indian rupee has ascended to a four month high, which is putting pressure on the MCX gold rate in the domestic market. In the international market, the US CPI data came higher signaling a rise in demand for the yellow metal. However, softer Indian inflation data may continue to lend support to the Indian rupee against the US dollar.

They said that the yellow metal may continue to trade range bound in the $2,010 to $2,080 per ounce range in the spot market whereas on MCX, the precious bullion may continue to trade in 62,200 to 63,500 per 10 gm range. Speaking on gold price movement in the week gone by, Sugandha Sachdeva, Founder at WealthWave Insights said, "The week concluded with gold prices experiencing a modest 0.30% decline, as it recovered swiftly from a one month low towards the end.

Persistent pressure on prices was observed throughout the week, primarily influenced by the steady movement in the dollar index, which subdued interest in the precious metal. The ongoing uncertainty regarding the timing of potential rate cuts by the US Fed has played a pivotal role in supporting a retreat in the greenback in recent days." Sugandha Sachdeva went on to add that the spotlight of the week was on the US Consumer Price Index (CPI) data, revealing an annual inflation surge of 3.4% in December, surpassing the anticipated 3.2% rise.

The monthly CPI also showed a 0.3% increase from the preceding month. This unexpected uptick in consumer prices exerted downward pressure on gold prices. However, a contrasting trend emerged with the Producer Price Index (PPI) reading, released towards the week's end, indicating softer inflation compared to forecasts and core PPI maintaining consistency with its November reading.

Gold price outlook "This development (PPI data) reinforced market expectations of a potential rate cut of 25bps by the US Fed in March, providing support to gold prices. Furthermore, the escalating tensions in the Middle East region heightened demand for gold, bolstering its safe haven appeal," said Sugandha.

Expecting a sideways to a positive trend for gold in the near term, Anuj Gupta, Head — Commodity & Currency said, "Gold prices may witness some pressure on upper levels as the Indian rupee has ascended to a four month high. This would put pressure on domestic prices. Apart from that, the month of Kharmas is going to end with the Lohri celebrations.

So, we may witness some fresh demand in the physical market after the Sankranti celebrations across the nation." Key levels to watch Anuj Gupta of HDFC Securities said that gold prices are trading in the $2,10 to $2,080 per ounce range in the international market whereas it is trading in 62,200 to 63,500 per 10 gm range on MCX.

He said that a bullish or bearish trend can be assumed on the breakage of either side of the range in either market. "Gold and other bullions are expected to remain range bound but I would advise investors to `maintain buy on a dip strategy as Middle East tension may help yellow metal and other precious metals to bounce back from lower levels," said Anuj Gupta of HDFC Securities.

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