Gold Price Up On Russia-Ukraine Jitters But Set For Weekly Slip: Time To Buy? Experts Weigh-In

Gold prices are edging higher in the aftermath of Russia's strikes on Ukraine's energy infrastructure, that led to widespread power cuts in the country.

Spot gold was trading nearly 1% higher at $2,662.3 an ounce at 7:15 a.m. (GMT) on Friday. The uptick in global rates also led to a climb in the Indian gold futures on Multi Commodity Exchange, as the December contracts were trading 0.83% higher at Rs 76,350 per 10 gram at 12:48 p.m.

Despite the rise in daily charts, the precious metal is headed for a weekly decline. The current spot gold rates are about 2% lower as compared to last week's close of $2,716.49.

On the MCX, the current rates are 1.5% lower as against the previous week's settling price of Rs 77,518 per 10 gram.

A similar trend is also seen in the retail market, where gold is up 0.6% at Rs 76,738 per 10 gram, but down 1.35% as compared to last week's close of Rs 77,787 per 10 gram, according to the rate card shared by the Indian Bullion Jewellers Association Ltd.

The gold rates are still significantly behind their pre-US election highs, which makes the metal an attractive buying option for risk-averse investors, according to analysts.

Spot gold is still down by around $90 as compared to $2,750.01 per ounce on Nov. 5—the US election date. The metal has tumbled since then in the face of strengthening US dollar and bond yields. On the MCX, the rates are still down by around Rs 1,660, as compared to a high of Rs 79,181 per 10 gram on Nov. 5.

"We continue to recommend including gold as a strategic component of an investor's portfolio," said Anindya Banerjee, senior vice president and head of commodity and currency at Kotak Securities Ltd. The dip in the metal's price, as compared to the pre-US election highs, presents an "excellent opportunity" to accumulate the yellow metal at more favourable levels, the expert noted.

Donald Trump's presidency in the US, scheduled to begin from January, could accelerate the process of de-dollarisation and economic decoupling, creating a structural tailwind for gold in the long term, he said.

While there is a risk of sudden spikes in the US dollar, which could trigger short-term corrections in gold prices, "such instances should also be viewed as opportunities to accumulate", according to Banerjee.

Additionally, there is a possibility that a Trump administration may pursue policies aimed at weakening the US dollar to boost the country's trade competitiveness, he said. "This scenario would further enhance gold's appeal as a hedge against currency and economic uncertainties."

The geopolitical jitters and the path to be adopted by the US Federal Reserve will be key in determining the movement of gold, analysts underlined.

"After Russia's recent strike on Ukraine, and also because of the recent dip, we are witnessing some kind of buying. Gold is in a positive territory. The factors to look forward are not only geopolitical tensions, but also how the Federal Reserve policy direction moves," said Kranthi Bathini, director at WealthMills Securities Pvt.

Notably, gold is seen as a top safe-haven asset, which increases its appeal amid global headwinds. The metal is also viewed as a hedge against inflation, which raises its demand if central banks slash lending rates.

The Fed, which has slashed benchmark interest rates by 75 basis points since September this year, could announce another 25 basis points cut in December. The market expectation of a quarter percentage point-cut currently stands at 62.8%, according to the CME Group's FedWatch Tool.

The US inflation data, released on Wednesday, showed consumer price index-based inflation rising by 2.3% in October, in line with expectations. "This raises hopes for a potential rate cut by the Federal Reserve in December. This development is also supportive of gold prices, reinforcing its appeal amid easing monetary policy expectations," Banerjee said.

For Indian investors, gold has strong support in the range of Rs 72,000 to Rs 73,000 per 10 gram on the MCX, providing a solid foundation for price stability, according to Banerjee.

On the upside, key resistance levels are observed around Rs 78,000 per 10 gram, with a further hurdle near Rs 80,000, he said. "These levels could act as pivotal zones for price action in the near term."

Bathini, reiterating the bullish view on gold, said this is "definitely the right time to buy the metal" for risk-averse investors. "There is a dip as compared to the recent highs, and this can be utilised by them to accumulate gold," he said.

However, for investors with risk-appetite, equities will continue to have a larger appeal, the analyst noted.

Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.