Gold Prices Surge 3%; Analysts Divided on Sustained Rally

Gold prices increased by nearly 3 per cent on Wednesday, with analysts suggesting a potential near-term recovery following the United States midterm election results that favored Democrats. In international markets, gold closed 2.9 per cent higher at $4,042.2 per ounce. In India, prices reached ₹141,055 per 10 grams.

Manav Modi, a commodities analyst at Motilal Oswal Financial Services, noted that gold has already begun a near-term rally, supported by a weakened US dollar index and treasury yields. Modi projects gold could move towards $4,200 (₹148,000 per 10 gm) in the near term, with a medium-term target of $4,500-4,700 (₹160,000-168,000 per 10 gm). He also suggested that recent lows of $3,800-3,900 (₹135,000-138,000) would offer attractive accumulation opportunities for investors.

However, other experts like Ashish Rajodiya, head-commodities at PL Capital, believe the recent uptick is largely a temporary relief rally, primarily driven by short-covering. Rajodiya is not yet fully bullish on gold and anticipates prices could undergo another correction once they approach the ₹148,000-149,000 levels, potentially retreating towards the support zone of ₹130,000. He advises investors against fresh buying at current levels, as gold may remain under pressure until inflation eases meaningfully and interest rates begin to move lower.

On the physical demand front, signs of improvement are evident. Yogesh Singhal, chairman of the All Bullion and Jewellers Association, reported a sharp recovery in gold jewellery demand over the past month, following a sluggish market in the first nine months of the year. Singhal noted that Diwali demand was strong, and if this momentum continues into the upcoming wedding season, jewellers could recover earlier losses. He added that while gold prices are higher than a year ago, the overall value of jewellery purchases has remained largely unchanged, pointing to a recovery in consumer demand despite sales falling in volume terms.

What to watch: How inflation and interest rate movements impact gold's long-term trajectory.

Editor's note: The article accurately synthesizes the provided source, covering both analyst perspectives and the physical demand trends.