Gold prices in India at all time high, should you buy or is yellow metal headed for correction?

June 25, 2019

Mumbai (June 25)  Gold prices in India hit an all-time high today amid geopolitical tensions in the Middle East and trade conflict between the US and China. The gold prices rallied more than 8.5 per cent in June on MCX, while on Comex they rallied around 11 per cent. While the US Fed rate cut expectation in July is supportive of the gold prices, experts caution against investing in gold at this time as they expect some correction in the prices going ahead. Globally, gold prices were trading higher at USD 1,429.80 an ounce. In the national capital, gold prices surged by Rs 200 to Rs 34,470 per 10 gm.

“Gold ahead of the budget may experience a small dip in prices as it has witnessed smooth rally of around 8% in June itself due to a dovish stance of Fed, BoJ & ECB. Further, the rise in geopolitical risk between the US and Iran has supported safe-haven buying. There is a demand to cut import duty from 10% to 6% from the jewellery industry. Only time will tell if the government accepts this recommendation. The undertone is bullish in the yellow metal but we don’t rule out a technical correction,” Jigar Trivedi, Fundamental Analyst – Commodities, Anand Rathi Shares and Stock Brokers, told Financial Express Online.

The precious yellow metal underperformed other financial assets over 3-4 years. Gold on Comex in June month gained nearly 10.75 per cent since 2000, which is the biggest gain in the month in 19 years, according to Kedia Commodity.

“We believe that the momentum in gold prices would continue to push higher with potential targets of Rs 36,000/10gms by the year-end seems very much possible and Rs 40000 – 45000/10gms as potential targets in rupee terms by 2020. We advise caution in short term as the sharp rally could see some corrections, but investors can look to buy on dips,” Kishore Narne, Head of commodities and currencies, Motilal Oswal Financial Services, told Financial Express Online.

According to experts, with Ganesh pooja around the corner, there will be an uptick in B2B demand for gold post budget. The jewellery industry is also pushing for import duty cut to 6 per cent from 10 per cent. Considering all these factors which bode well for the gold buying, the experts are still cautioning the investors to hold their horses as the prices will dip in the coming time.

“It looks good to buy gold as the rupee weakness can be seen ahead of Budget. Uncertainty in the equity market, US rate cut expectations and geopolitical tensions in the Middle East are also supportive of gold. July and August being festive seasons will see a rise in gold demand,” Ajay Kedia, Director at Kedia Commodities told Financial Express Online.

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