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Informist, Tuesday, May 6, 2025

 

By Sandeep Sinha

 

MUMBAI – The correction in gold prices towards the end of last month may be short-lived, traders and analysts said. The yellow metal has resumed its uptrend and is seen scaling a new lifetime high in May on the back of safe-haven demand amid continued uncertainty relating to trade talks between the US and China. An escalation of the conflict in West Asia, a firm demand for the bullion from central banks, inflows in gold exchange-traded funds, and persistent weakness in the dollar has further supported the sentiment.

 

"The return of Chinese ETF demand post Labour Day holiday week, ongoing concerns over tariff tussle between US-China, and US President Trump's increased belligerence against the US Federal Reserve Chairperson Powell (for not cutting key interest rate) could support the precious metal," Ashwini Bansod, head of research – commodities at PhillipCapital, said.

 

"The last part is especially likely to come to the forefront again as the Fed is expected to stay pat on interest rates at its meeting on May 7 (Wednesday). Concerns over increased US government efforts to influence the US Fed is likely seen as negative for the US dollar and positive for gold," Bansod said.

 

According to an Associated Press report, Israel approved plans Monday to capture the entire Gaza Strip and remain in the Palestinian territory for an unspecified amount of time. The decision, if implemented, will likely raise the possibility of widening conflict in the region and support bullion prices.

 

According to the median of estimates from 15 broking firms polled by Informist, June gold futures on the Multi Commodity Exchange of India are seen in the range of INR 90,800-INR 97,000 per 10 grams this month. On the COMEX, prices are seen at $3,150-$3,391.5 an ounce. At the time of writing thsi report, the June gold futures contract was at INR 96,310 per 10 grams on the MCX and $3,377.4 an ounce on the COMEX.

 

The price of gold in April rose 6.3% on month on COMEX and hit an all-time high of $3,485.9 an ounce on Apr. 22. On the MCX, gold prices rose 5% and hit a record high of INR 99,358 per 10 grams the same day.

 

According to the World Gold Council's latest Gold Demand Trends report, central banks bought 243.7 tonnes of gold in Jan-Mar, indicating a firm appetite for the yellow metal despite the high prices. They had bought 309.9 tonnes of gold in the same period a year ago.

 

Gold holdings with SPDR Gold Trust, the world's largest gold-backed ETF, rose by 12.32 tonnes on month to 944.26 tonnes in April. Gold stocks at COMEX warehouses rose 17.31 tonnes to 1,289.33 tonnes in April, the exchange data showed.

 

"We maintain our bullish stance on gold, and the recent pull-back looks healthy in the current bull run. Geopolitical tensions are likely to be complicated by Trump's trade and foreign policies, driving haven demand for gold in 2025," ANZ Research said in a report. It said that central banks are continuing to stockpile gold. "We expect central bank purchases and strategic fund flows into gold will lift prices towards $3,600/ounce by the end of 2025."

 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, declined 4.5% in April as investors shunned the dollar and shifted to other currencies. A weaker greenback makes dollar-denominated commodities like gold cheaper for those holding other currencies, thus improving its demand.

 

However, weak retail demand in top consumers China and India and money managers trimming their bullish positions may restrict the upside in precious metal prices. The sharp appreciation in rupee against the dollar also restricted its upside in the domestic market.

 

The rupee strengthened nearly 1.2% against the dollar in April and gained over 4% from the low of 87.95 touched on Feb. 10 to settle at 84.25 on Monday. A firm rupee makes precious metals priced in dollars cheaper for domestic buyers.

 

As record high gold prices impacted affordability, jewellery demand in China fell 32% on year to 125.3 tonnes in Jan-Mar, and 25% on year to 71.4 tonnes in India during the same period , the WGC said.

 

Following is the summary of the poll by Informist on gold prices in May and details of estimates by respondents, in alphabetical order:

 

Brokerage	MCX support (INR/10 gm)	MCX resistance (INR/10 gm)	COMEX support ($/oz)	COMEX resistance ($/oz)
Axis Securities	89,000	100,000	3,150	3,500
HDFC Securities	89,500	97,400	3,090	3,490
ICICI Securities	89,000	98,000	3,100	3,450
JM Financial Services	92,000	96,800	3,190	3,360
Kedia Comtrade	91,000	96,000	3,150	3,380
Kotak Securities	89,800	96,500	3,100	3,400
LKP Securities	91,000	96,000	3,150	3,350
Mirae Asset Sharekhan	91,400	97,000	3,211	3,357
Motilal Oswal	90,000	96,600	--	--
Nirmal Bang	90,000	97,000	3,100	3,430
Prithvi Finmart	91,400	96,600	3,180	3,400
Religare Broking	91,500	99,400	3,195	3,510
Reliance Securities	88,533	97,500	3,140	3,383
SMC Global	91,800	98,900	3,180	3,380
Ventura Securities	90,800	96,000	3,165	3,383
Median	90,800	97,000	3,150	3,391.5

 

End

US$1 = INR 84.38

 

Edited by Tanima Banerjee

 

 

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