Gold price dips below ₹48,000 ahead of Fed meeting. Good opportunity to buy?

Gold price today at MCX (Multi Commodity Exchange) dipped for second consecutive day and came below 48,000 per 10 gm mark. In early morning deals, yellow metal future contract for February 2021 slide below 48,000 levels and hit intraday low of 47,969 per 10 gm mark. On 14th December 2021, gold price slipped around half per cent and closed at 48,072 per 10 gm

According to commodity market experts, this dip in gold price is due to the Fed meeting today. They said that there are speculations of bond tapering announcement coming out from this Fed meeting as Fed had raised concerns over the rising inflation in the US. However, they said that inflation is not going to end soon and any decision from the Fed in regard to interest rate hikes is not going to have its impact in short-term. So, any dip in the gold should be seen as buying opportunity as market will start discounting Fed’s interest rate hike decisions after around a fortnight.

Highlighting upon the gold price triggers oscillating around the Fed meeting today; Sugandha Sachdeva, Vice President-Commodity & Currency Research at Religare Broking Ltd said, “Gold prices have witnessed some decline on speculations that Fed may announce quick bond tapering steps in today’s meeting and give further hints about rate hikes in the US by April or May 2022 as the Fed is inclined to fight high inflationary pressures in the US economy where the headline inflation is running at a 40 year high. So, market is expected to adjust to these monetary tightening measures in coming days. But any dip in gold prices in next fortnight to one month should be taken as good buying opportunity by gold investors.”

Sugandha Sachdeva of Religare Broking went on to add that in spot market gold has immediate support at $1760 -1720 per ounce zone while $1680 per ounce is a key long standing support on a closing basis.

Echoing with Sugandha Sachdeva’s views on gold price outlook; Amit Sajeja, Vice President — Commodity Research at Motilal Oswal said, “Gold price has failed to rally after the record US inflation data as there was fear of interest rate hike in Fed meeting, which is scheduled today. Now, it would be interesting to see whether Fed’s stance on interest rate is hawkish, moderate or dovish. Depending upon the outcome of today’s Fed meeting, there can be some knee-jerk in gold price in short-term. However, Fed initiatives would be able to give its result from next fiscal and hence we can expect some sharp rebound in gold price after a fortnight.”

Amit Sajeja of Motilal Oswal said that even after the bond tapering measures are announced after Fed meeting today, US inflation is expected to remain around 4 to 4.5 per cent next year, which would continue to support gold price rally.

Advising buy on dips strategy to gold investors, Sugandha Sachdeva of Religare Broking Ltd said, “Gold prices around 47,250 to 47,300 per 10gm on MCX should be seen as a good buying opportunity for short term, while maintaining strict stop loss below 46,800 per 10 gm levels.”

Suggesting gold investors to accumulate on any major dip in gold price; Anuj Gupta, Vice President — commodity & Currency Trade at IIFL Securities said, “We are expecting some rebound in the gold price ahead of Fed meeting and hence one can buy gold at around 48,000 levels today for the intraday target of 48,300 maintaining strict stop loss at 47,800 levels.”

The consumer price index (CPI) in the United States rose an annualised 6.8 per cent in November, the largest annual increase since June 1982, as the cost of goods and services jumped amid supply chain constraints.

There are encouraging signs in the physical market, with both China and India boosting consumer demand. World Gold Council data shows Chinese consumers bought 221.5 tonnes in the third quarter, up 26 per cent from the same period in 2020, while India’s consumer demand rose 47 per cent to 139.1 tonnes.

However, total gold demand fell 7 per cent in the third quarter to 830.8 tonnes on lower bar and coin demand, as well as a drop in exchange-traded fund holdings. 

(With inputs from Reuters)

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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