scorecardresearch

Gold’s biggest quarterly gain in 2-yrs in Q1; next week outlook bullish, Akshaya Tritiya to fuel retail demand

MCX gold outlook is bullish for next week as India may experience a pick-up in retail demand ahead of Akshaya Tritiya

gold, MCX, bullion, MCX gold
Gold posted its biggest quarterly gain in almost two years as the war in Ukraine, inflation and the outlook for the global economy burnished its haven appeal in the first three months of the year. Image: Reuters

By Jigar Trivedi

In the week gone by, Gold slipped below $1,880 an ounce, hitting their lowest in over two months amid a general dollar strength. The dollar index scaled its highest since January 2017, fueled by the expectations that the Federal Reserve will be more hawkish than peers, as well as by safe-haven flows fanned by concerns over slowing growth in China and Europe. The US central bank is expected to increase interest rates by a hefty 50 basis points at its May 3-4 meeting to bring inflation under control. Investors also remained cautious about China’s Covid situation amid fears that Shanghai-style lockdowns may spread to other parts of the country, while Russia’s latest move to cut gas supplies to Bulgaria and Poland escalated an energy crisis in Europe. The recent currency moves indicated a flight to safety out of other currencies into the US dollar, putting downward pressure on bullion prices.

Meanwhile, the World Gold Council in the latest report said that gold demand in India, the world’s second-biggest consumer, could take a bigger beating if prices continue to spiral upward and inflation squeezes disposable incomes. Sales slumped 18% from a year earlier and imports plummeted by more than half in the January-to-March period as prices surged and a fresh outbreak of coronavirus kept people away from stores, the London-based promotion group said. Fewer auspicious days for weddings, a key source of demand, and the decision by many households to delay purchases in anticipation of a price correction also added to the decline, it said.

Gold posted its biggest quarterly gain in almost two years as the war in Ukraine, inflation and the outlook for the global economy burnished its haven appeal in the first three months of the year. Prices in India, which track their overseas counterpart, rose more than 8% during the quarter. The higher prices will boost recycling, or the sale of old jewelry, to 100 tons to 120 tons this year from about 75 tons the previous year. Still, ample monsoon rains this year, which drive farm incomes, and growth in investment demand, could offset the impact of higher prices. Full-year demand for gold jewelry, coins and bars is likely to match the 797 tons bought in 2021.

The outlook is bullish for next week as India may experience a pick-up in retail demand ahead of Akshaya Tritiya. In the week gone by, gold has fallen by more than 1% hence rebound is also very much on the table. We expect MCX Gold June to rise to Rs. 52,200 per 10 gram in the week. 

(Jigar M Trivedi, Manager – Fundamental Research Analyst (Non Agro Commodities), Anand Rathi Shares and Stock Brokers. Views expressed are the author’s own.)

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Commodities