Gold prices moved in a narrow range on Wednesday, May 24. On the Multi Commodity Exchange (MCX), gold futures were trading at Rs 60,307 per 10 grams, after recording a rise of Rs 37 or 0.06 percent. Globally, spot gold ticked 0.1 percent lower to $1,973.38 per ounce by 0257 GMT. US gold futures were steady at $1,975.90.

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The trigger

According to Prathamesh Mallya, DVP Research, Non-Agro Commodities & Currency, Angel One Ltd, gold prices were trading flat, as the stronger dollar continued to maintain pressure. Investors were cautious ahead of an eventful week, with the spotlight remaining on the US debt ceiling talks, as well as this week's Federal Reserve policy minutes and economic data.

The dollar index remained stable, making dollar-priced gold less appealing to foreign buyers.

Representatives of US President Joe Biden and congressional Republicans ended another round of debt-ceiling talks without a resolution on Tuesday as the deadline to raise the government's $31.4 trillion borrowing limit ticked closer.

The outlook

Gold is a global commodity, valued in dollars and a rise in the dollar makes buying gold dearer. Also, the uncertainty surrounding the debt ceiling in the US has led to uncertainty around dollar and gold prices.

Colin Shah, MD at Kama Jewelry expects gold to trade rangebound till clarity emerges from the US on the debt ceiling, the next Fed meeting.

As per Rahul Kalantri, VP of Commodities, Mehta Equities, gold has support at $1960-1946 per ounce while resistance at $1984-1996 per ounce. In rupee terms, gold has support at Rs 59,950-59,740 per 10 gm, while resistance is at Rs 60,480, 60,690 per 10 gm.

Investment strategy

It's important to understand that gold is always a good proposition from an asset allocation point of view. As per Shah, investors should not look at hoarding it, though.

" The Reserve Bank of India (RBI) has announced the withdrawal of Rs 2,000 currency notes. There are some reports of panic gold buying to exhaust the Rs 2,000 currency notes. This may lead to a rise in demand for gold albeit temporarily. However, investors should keep in mind the prescribed limits for individuals to hold and store gold at home for individuals, unmarried and married women," Shah said.

Kunal Shah, Head of Commodities at Nirmal Bang, believes that gold is currently in a consolidation phase and that a significant trigger is needed to drive its price. He suggests that this trigger could come from weak economic data in the US or from other parts of the world experiencing weakness.

Despite a correction in the gold market, Shah sees limited downside from its current levels. Shah suggests that accumulating gold in the range of $1,950-1,940 per ounce is favourable.

First Published:May 24, 2023 12:24 PM IST