Amid correction in the bullion metal prices, after hotter-than-expected US inflation and PPI print, the stock market and decentralized digital currency market have also fallen under the bears’ grip. Anuj Gupta, Head — Commodity & Currency at HDFC Securities talks to Asit Manohar of Mint and unveils triggers that may lend support to the falling gold rates today. The HDFC Securities expert also discussed the risk-reward ratio available in the current bullion market. Below are the edited excerpts:

Gold prices have retraced from the recent all-time high. Do you see a bounce back in the near term?

I believe that in the near term, gold price may consolidate in an upper-end range following mixed global cues. The disappointing US inflation data has hit expectations for a near-term US Fed interest rate cut. Meanwhile, ongoing geopolitical unrest and weakness in the Eurozone and Chinese economies is expected to provide support to falling gold prices. Apart from this, global central banks across world are buying gold, which may lend support to the precious yellow metal price.

As the US Fed interest rate is in the market’s focus, what is your expectation from the central bank of America?

After the hotter-than-expected US inflation data, the US Fed is currently in a dilemma over interest rate cuts. I believe that the US Fed may remain data-dependent for a possible US Fed interest rate cut. As per the CME Fed fund tool, swap markets are now indicating a 55% chance of a US Fed interest rate cut in June, down from 67% a week ago. So, chances are high that the US Fed may delay interest rate cuts until July.

How do you look at the risk-reward ratio in gold and silver prices after a rebound in US dollar rates?

Gold price has surged more than 5 percent in the last two weeks. So, gold investors are advised to wait for a 2 percent to 3 percent correction from current gold and silver prices. The disappointing US inflation data for February 2024 may force the US Fed to keep key interest rates elevated, which spurred a rally in the US Treasury yields and the US dollar index, both negatives for gold.

Surprisingly, gold, equity, and bitcoins are moving in the same direction. Any specific reason?

It’s liquidity and momentum that is driving all three assets together. Separate factors like soaring demand for Bitcoin ETFs are another reason for Bitcoin prices following gold prices and stock market trends.

Crude oil price on MCX has ascended to a 4-month high. What is fueling oil prices these days?

Following geopolitical tension and demand-supply constraints, crude oil prices recently surged to a fresh year high. OPEC countries reducing production has further squeezed supply in recent times. So, investors increased their net long position in WTI crude oil.

What are the triggers that are expected to dictate gold and silver prices in the near term?

The US Fed interest rate is expected to dictate bullion prices in the near term. Apart from this, further escalation of geopolitical unrest, and political uncertainty, may fuel demand for gold in the future market.

In the medium to long-term perspective or say by the end of September 2024, I see the Comex spot gold price rally towards $2250 and $2300 levels. On MCX, I see gold rates around ₹67,000 to ₹67,500 levels.

Silver rate today is in a broader range of $20 to $27 per ounce. Silver price may become bullish once it gives a breakout above the $27 level on a closing basis. I would like to add that the downside in the MCX silver rate today looks limited.

Gold and silver investors have various options available in today’s market. Active investors can take position in the futures market whereas passive investors may invest in mutual funds and ETFs (Exchange Traded Funds).

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