Gold prices may continue to climb as the US dollar softens in the backdrop of recessionary fears in the United States and concerns that the US Fed may further hike the benchmark rates in May.
Wealth management and advisory firm, Emkay, forecasts that gold prices may soar as much as $2,080 per troy ounce (oz) due to various global tailwinds.
After five consecutive weeks of decline, the US dollar was set to register its first weekly gain on Friday even as concerns of another Fed rate hike deepen.
In a note, Emkay observed that “there is a high probability of gold prices testing the $2020 level and breaking through it”.
It added that the current range of $1,930 to $1,960/oz offers a strong support level.
Dollar Index Cue For Gold Prices
The Dollar Index’s current narrow range “is lending support to gold”, it said.
Highlighting the concerns of some Fed officials over the country’s banking system, it said, “The stress in the banking system will only accelerate the arrival of the recessionary conditions.” And that will keep gold fairly well-supported.
Gold, it said still retains its safe haven status and the recent events have had a positive impact due to this. Hence, there is a higher probability for gold testing the $2,100 mark again.
“The only factor that may dilute this move would be a strong dollar on the Dollar Index, and a more prolonged interest rate up-cycle,” it said in a press release this week.
Besides, uncertainties in the US banking system are pushing up the gold prices.
Gold is currently trading in the range of $1960-2060/oz. It came twice near the $2,060 level over the past one month, suggesting that the uncertainties around the US banking system, and related developments in Europe may have helped propel the gold prices, as people moved towards gold to hedge against volatility.
In addition, the concerns of a slowdown are also supporting gold. It is speculated that the potential for a slowdown could fuel further uncertainties, helping gold prices to increase.
In India, gold buying activities are expected to accelerate around the festival of “Akshaya Tritiya”, which falls on Saturday, April 22, considered an auspicious day for new beginnings, wealth creation, and prosperity.
