Gold prices on Thursday hit a fresh all-time high of Rs 61,490 per 10 gm, nearly 12 percent so far in 2023. This comes on the back of gains in overseas markets. Globally, spot gold rose 0.5 percent at 2,049.31 per ounce by 0130 GMT. Earlier in the session, prices rose to $2,072.19 per ounce and hovered close to an all-time high of $2,072.49 scaled in 2020.

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The trigger

The gold price has been rising after the US Fed's rate hike announcement by 25 bps on Wednesday.

The Fed raised its benchmark overnight interest rate by 25 basis points, but no longer said that it "anticipates" further rates increases would be needed, only that it will watch incoming data to determine if more hikes "may be appropriate."

Gold is helped by "lower yields and a weaker dollar in the aftermath of the recent Fed meet and changes in the policy statement language providing the conviction that the central bank will likely shift towards a rate pause," Yeap Jun Rong, market analyst at IG was quoted as saying in Reuters report.

The dollar index was down 0.2 percent, making greenback-priced gold more affordable for overseas buyers.

Back home, Colin Shah, MD at Kama Jewelry said that the developments in the US-Fed meeting, the debt ceiling, and concerns around slowing economic growth are affecting the dollar and ultimately, the gold/silver prices.

"The hiking of rates by the US Fed has put pressure on the dollar and indications of pausing and a likely mild recession in the later part of 2023 have provided support to gold prices. The US government and the Treasury Department have raised their concerns about the deadlock and delay on the debt ceiling issue, and the slowing economic growth has created growth uncertainties, thereby pushing prices on the higher side," he said.

Gold Outlook

Shah believes that the current setup has increased the appeal of gold.

"International gold prices are likely to hit $2090–2100/oz and Rs 62,500–62,750/10 gm and silver prices between Rs 77,600-77,800 and $26.50-27/oz in the short to medium term," he said.

According to Windmill Capital, the equity markets are expected to remain volatile due to inflation and slowdown concerns, gold will continue to remain in focus as investors look to move towards safety.

Usually, gold acts as a hedge against inflation and protects capital when the equity markets are in a downtrend.

“Gold is expected to yield good returns in FY24 as well. Inflation is coming off highs and RBI’s pause in the last policy clearly indicates their focus is on growth. While FIIs buying into the Equity markets in the past few sessions is a boost for Equity markets, the volatility in the equity markets will keep precious

metals an attractive space to park funds," Naveen KR, Senior Director - Investment Products, Windmill Capital and smallcase manager said in an earlier interaction with CNBC-TV18.com.

Investment strategy

Motilal Financial Services said that they maintain a positive stance for gold and recommend buying on dips, with a target of Rs 63,000.

"There are several platforms for market participants to invest in gold based on their risk profile. From a longer-term horizon, it is advised to invest in SGB which will help to capitalise on the price rise in gold + give the investor an additional 2.5 percent interest each year, along with increased participation, as it crossed the 100 trillion mark recently," it said.

Several other modes to invest could be in form of ETFs. This can be preferred over purchasing gold in physical forms like jewellery, coins, and bars as it can be either dematerialised or traded in paper form just like regular funds on the stock exchange.

First Published:May 4, 2023 11:10 AM IST