Buy on dips
The recent nuanced landscape in gold prices, marked by a drop from 64,000 to 61,000, unveils a compelling buying opportunity. Similarly, silver, experiencing a dip from 78,000 to 71,000, presents an attractive entry point for fresh and passive investments.
Global Macros
One should look to capitalise on crises. It can be economic turmoil, war or inflation, as gold is a hedge against market uncertainties.
Fed Action
The driving force behind this market shift is the dovish stance emerging from the Federal Reserve’s policy meeting. Federal Reserve Chair Jerome Powell’s positive commentary has accentuated the potential for a substantial interest rate cut in 2024. This stance reflects an accommodative approach aimed at bolstering the economy.
Given this backdrop, financial experts recommend maintaining a decent allocation of 15-20% in portfolios, leveraging the current levels as an advantageous entry point for both gold and silver.
Gold Bonds
Investors with a low-risk appetite can buy Sovereign Gold Bonds (SGBs) issued by the RBI on behalf of the government. It stands out as an enticing option. Investors benefit from capital appreciation, a 2.5% interest on the issue price and long-term tax benefits for holding till maturity.
Gold Outlook
While prices may undergo a correction towards Rs 59,000 and Rs 70,000 for gold and silver, respectively, in response to potentially higher Consumer Price Index (CPI) data, the prevailing outlook suggests a commitment to a dovish stance. This bodes well for the overall environment surrounding gold and silver prices, making any correction towards 59,000 a potential buying opportunity.
On the upside, gold prices may witness levels ranging between 66,000 and 68,000, while silver could explore the range of 85,000 to 90,000. These projections indicate a positive trajectory for precious metals, encouraging investors to consider strategic accumulation.
Technicals Analysis
On the technical charts, gold is showing a positive setup for the coming months, with support seen at the 61,000-60,000 range. This creates an opportune moment for positional investors to capitalize on any dip in entry prices, with an upside potential target of 66,000- 68,000.
In the case of silver, the 68,000-71,000 range is identified as a strong support zone in weekly charts. This support is particularly significant given the robust rally witnessed in silver from 62,000 to 78,000 in 2023. Additionally, the 68,000-70,000 range represents the 61.8% retracement level of the rally, adding further strength to this support zone.
In conclusion, the recent price drop in gold and silver is seen as a transient correction rather than a shift in long-term trends. Investors are urged to adopt an accumulation strategy, whether through Exchange-Traded Funds (ETFs), bonds, or physical holdings.
(The author is Vice President, Research Analyst at LKP Securities)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
