Domestic brokerage firm Axis Securities noted that gold prices are showing signs of stress amidst key macro shifts, with concerns mounting over a potential break below a critical support band that could trigger further downside.
The brokerage firm highlighted that the expectations of further rate cuts by the US Federal Reserve have cooled, impacting the demand for safe-haven assets like gold. Furthermore, trade-war-related growth fears have eased, leading to a rise in bond yields, which is further undermining gold’s appeal.
With gold offering no yield, rising interest rates are making it less attractive as an investment asset, the firm added.
According to Axis Securities, gold is currently testing the lower band of a 50-day moving average envelope (+3%), which has successfully supported all dips since November 2024.
They identified a key timeframe from May 16 to May 20 as crucial for a potential trend reversal. The report also pinpointed $3,136 as a critical support level in the international markets, with a break below this point potentially opening the doors for further declines toward the $2,875-$2,950 range.Meanwhile, Renisha Chainani, Head of Research at Augmont, shared similar concerns, stating that gold prices have been under considerable pressure, driven by a combination of geopolitical tensions and weakening demand.In her report, she noted, “Gold prices bounced up about $100 (Rs 1,500) from their intraday lows as investors appeared to be shifting back to safe-haven assets due to a slowdown in the pace of discussions between Russia and Ukraine and less-than-expected US data”.
Chainani also emphasized the potential buying opportunities emerging amidst the downside pressure.
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“As gold prices have broken the Double-top neckline support of $3200, more downside is expected up to $3000-50 (Rs 87,000 – 88,000) in the short term,” she added, suggesting that while the immediate outlook may be bearish, long-term investors may find value at lower levels.
The technical outlook for gold also points to significant downside risk. According to the report from Augmont, the Indian gold support level stands at Rs 92,000/10 gm, while the resistance level is at Rs 94,000/10 gm. This indicates a narrow trading range, but with the broader market sentiment leaning towards the downside, further declines cannot be ruled out.
Gold outlook ahead
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions, conveyed a slightly more optimistic view, stating that gold’s long-term fundamentals remain intact despite the current correction.
“While gold’s long-term fundamentals are fundamentally intact, a short-term view of its price trajectory remains vulnerable to macroeconomic sea-changes. Investors still need to be especially attentive to what plays out globally with a diversified strategy in the event of a price downside tail,’ he said.
Kothari also warned of a potential steep correction if global economies begin to recover at a faster pace than anticipated.
“Nonetheless, a steep correction could also be on the horizon. If global economies start to see speedier recoveries, signaling the end of the necessity of risk-off trades, gold could slip downward to the $3000-$3050 range,” he added.
Adding to this optimistic sentiment, Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies at Angel One stated that easing geo-political tensions between India-Pakistan, Russia-Ukraine, and ease of tariff situation between US-China, shifting inflation expectations in the US, are a combination of factors driving gold prices correction in the recent weeks.
However, he noted that the recent correction in gold prices have given investors an avenue to buy at lower levels.
“Our advice to investors is to accumulate on dips at around the 90,000/10gm mark. The upside potential for gold prices can be around Rs.97000/10 gms mark from a fortnight perspective,” Mallya added.
The current scenario presents a complex outlook for gold investors, with multiple analysts indicating downside risks, but also highlighting potential buying opportunities for those with a long-term investment horizon.
Also read: Gold forecast: Analysts see further correction as prices hit 1-month low
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
