Gold Prices May Gather Pace After Dropping

Mumbai: Though gold prices have hit a 27-year high, analysts expect a correction in the prices in November before they gather further momentum.

“Nervous investors are rushing to lock-in profits as macroeconomic concerns once again rose to the fore,” said an analyst.

The gold price movement can see a lot of strength coming in from jewellery consumers in India and consumption in Turkey and West Asia.

“The festive season is taking a break in India and West Asia demand is expected to slowdown. This would result in some softening in the physical markets and result in lower price levels,” said Sahil Kapoor, analysts with Kotak Commodity Services Ltd.

Investment buying

The underlying market conditions remain favourable as inflationary pressure and investment buying lend support. Crude oil prices would also keep the precious metal markets supported.

Investment demand for gold is expected to be strong, as risk aversion would result in strong rise in investment in precious metals. Oil prices are likely to rise due to political tension and stagnant oil refining capacity worldwide, Kapoor said in the report.

The US Fed is expected to cut rates by 25 basis points on October 31, which is likely to boost gold prices across the globe.

“We feel the interest rate cuts and higher inflationary pressure in the months to come can be taken as a probable event which can increase investment demand in gold,” Kapoor said.

Gold ETFs have shown remarkable rise in holdings. With rising prices there has been steep rise in the holding of major Gold ETFs.

On MCX, December contract would see strong support levels at Rs 9,650-9,600 and Rs 9,530, as also resistance at Rs 9,860, Kapoor said.