In 2024, the backdrop for gold investment is particularly intriguing, says Religare Broking in a report. “The global economic landscape has been dynamic, shaped by fluctuating market conditions, geopolitical tensions, and shifting interest rates, all impacting gold prices. Despite these challenges, gold has maintained its status as a safe haven asset. Its strong performance in recent years, including notable returns in 2023, underscores its resilience and continued appeal to investors,” the report notes.

The brokerage, in its technical outlook, says, gold is currently trading near the upper trend line of its upward channel on the weekly chart, with all technical indicators showing overbought conditions. “This suggests that prices may face short-term resistance around ₹79,800 per 10 grams ($2,800 per ounce). Technically, we expect the rally to encounter some hurdles before continuing its upward momentum.”

“Additionally, prices are trading well above moving averages, such as the 50 and 100 EMAs, on the weekly chart, indicating the possibility of a short-term correction toward ₹76,700 per 10 grams ($2,675 per ounce),” it adds.

Factors that will can impact Gold prices

Analysts believe that key factors that may drive rally in precious metals this year are rate cut expectations from the Federal Reserve and rising geopolitical tensions, particularly in the Middle-East. Market participants will be also closely monitoring economic data from the U.S. as well as presidential election, which may impact bullion market dynamics.

Geo-Political Concerns

Religare Broking in its report highlights that ongoing geopolitical tensions are posing a serious threat to global financial stability, keeping demand for bullion strong. The Israel-Hamas conflict is exacerbating regional instability, disrupting global supply chains, and driving inflationary pressures. At the same time, China's military presence in the South China Sea and its ongoing trade disputes with the U.S. add to the challenges.

Rupee depreciation

The Indian Rupee, which recently breached the 84 mark against the U.S. dollar, hitting a new record low, continues on a downward trajectory. The continued pressure on the Indian rupee is likely, and a weakening rupee typically supports higher gold prices.

Investment Demand

Global investment demand has also been a factor in driving the rise of gold prices in 2024. In Q2, investment demand for gold bars, coins, and gold ETFs remained relatively stable year-on-year at 254 tonnes. However, combined demand for gold bars and coins saw a 5% decline compared to the previous year, although gold bar investment rose by 12%.

Physical Gold Demand

Physical gold demand has surged significantly in 2024, largely driven by Over-the-Counter (OTC) investments and increased central bank purchases. When including OTC investment, total gold demand saw a 4% year-over-year rise, reaching 1,258 tonnes in Q2—the highest second-quarter demand since 2000. Central banks have accelerated gold buying as part of their strategy for portfolio protection and diversification in uncertain times. The National Bank of Poland (NBP) and the Reserve Bank of India (RBI) were the largest gold buyers in Q2 2024.

Dollar Index

The relationship between the dollar index, global interest rate cuts, and gold prices is quite intriguing. Gold and the dollar index typically share an inverse correlation, as gold is often viewed as a hedge against inflation. Over the past six months, the dollar index has fallen from 106.50 to 100.15, contributing to gold prices reaching all-time highs. Despite a recent rebound in the dollar index, gold has managed to maintain its positive momentum.

Interest Rates

Typically, when central banks—particularly the U.S. Federal Reserve lower interest rates, gold prices tend to rise. This is because lower interest rates reduce the opportunity cost of holding gold, making it a more appealing investment. In September, the Fed initiated its first rate cut in four years, reducing rates by 50 basis points. The Fed is also forecasting a further 100-basis-point cut next year, with an additional 50 basis points expected in 2026, which could continue to support gold prices and potentially drive them higher in the coming months.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)

Dhanteras

Dhanteras 2024: Gold remains a trusted hedge in inflationary times, say analysts