Gold likely to surge up to Rs 42,000 by December-end

Mumbai: Geo-political uncertainties, sustained Central bank buying and weak rupee against $ will keep gold under pressure and are likely to push the prices up to Rs 42,000 per 10 grams level by the end this year, according to analysts.

"Geo-political uncertainties emerging from the Middle East may continue to underpin gold prices going ahead to $1,650 an ounce in Comex markets and Rs 42,000 in MCX," Commtrendz Research co-founder and CEO Gnansekar Thiagarajan said.

The yellow metal is likely to continue to remain bullish till the end of the year mostly due to sustained Central bank buying, geo-political uncertainties and possible year-end squaring of positions in equities boosting appeal for safe-haven gold, he added.

Gold prices were at Rs 38,302 per 10 grams in MCX, while it was at USD 1,506 in Comex. Motilal Oswal Financial Services (MOFSL) VP-commodity Research, Navneet Damani said, this year has proved to be one of the best years for gold returns as prices have risen by 15 per cent on the domestic front, getting some support from weakness in the rupee that has fallen by 1.4 per cent against the $.

"We expect that positive momentum for gold could continue further, but the pace of rally could get measured as uncertainties related to trade war is taking back seat.

This slowdown in major economies could push central banks to remain dovish for an extended period and that will support gold prices," he added.

The ease off in trade war could lead to some correction in prices, however, the prices remain bullish and expect to move higher to test previous highs of Rs 39,500 by the end of the year, he pointed out.

Kotak securities head of commodities Ravindra Rao said going forward gold is expected to average in a broad range of $1,460-1,530 in $ and rupee terms average between Rs 36,800-39,400 on MCX.

Investment demand which is the indicator of the safe haven buying in the yellow metal has surged in the third quarter, he said.

Although, the optimism about US-China trade talks and a Brexit deal has prompted traders to book some profits the gold remained bullish as the ongoing trade concerns have already impacted the global economy as seen from the International Monetary Fund projections, he opined.

As per the IMF, the global economy is projected to grow at 3.5 per cent in 2019 and 3.6 per cent in 2020, 0.2 and 0.1 percentage point below last October's projections, he added.

Abans Group chairman Abhishek Bansal said geopolitical tensions flared in the Middle East after an attack on the Saudi Aramco oil facility on September 14.

"Gold also found support after US lawmakers launched a formal impeachment inquiry on President Donald Trump on September 24.

All these developments created fresh uncertainty in the financial markets, which raised gold prices during the second and third week of September," he added.

The spot gold prices are likely to bounce back while remaining above the critical support level of $1,458, he said. "Gold prices in India would remain firm as we expect the rupee to weaken further from current levels.

The government's plan to boost economic activity through various tax sops could end up in higher fiscal deficit, thereby causing depreciation of the rupee," he added.