Domestic gold prices have risen sharply to their five-month high and the rally may continue towards Rs 51,000 per 10 grams level, analysts said. The yellow metal posted its biggest monthly jump since July 2020, supported by a softer dollar and growing inflationary pressures.
Gold is often used as a hedge against inflation and it has benefited from recent data showing a rise in prices in the US and UK. However, Federal Reserve officials have repeatedly maintained they expect any rise in inflation to be short-lived and said the monetary stimulus would stay in place for some time.
US consumer prices surged in April, with a measure of underlying inflation blowing past the Federal Reserve’s 2 percent target and posting its largest annual gain since 1992.
Further supporting the safe-haven metal is the recent weakness in the US dollar. The dollar index fell sharply last month and registered its second consecutive monthly loss, making gold less expensive for other currency holders.
According to an ICICI Direct report, MCX gold prices have immediate support around the Rs 48,800 level and as long as gold sustains above this level, it may see a further upside towards Rs 51,000 level.
Meanwhile, silver prices also rallied along with gold supported by a weaker dollar and rising industrial demand.
“The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, remained at lower levels last month, which indicates that silver continues to outperform gold since last year,” ICICI Direct said in a report.
Overall, the brokerage firm expects silver prices to continue this rally towards the Rs 78,000 level as long as they sustain above their immediate support of the Rs 70,000 level as rising inflationary pressures will also benefit silver along with gold as a hedge against inflation.
Also, continued investments into silver-dependent green technologies will push silver higher, it said.
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(Edited by : Ajay Vaishnav)