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With the gold market on a bullish streak, analysts are betting on the prices reaching its all-time highs once again. Domestic gold prices have risen sharply to their five-month highs this week.

On the Multi-Commodity Exchange (MCX), gold was trading 0.30% higher at Rs 49,140 for 10 grams in the afternoon trade on Wednesday.

Gold prices have already surged 8% in May, marking the best month since July 2020 and is on course to erase all losses of 2021 so far.

What is pushing gold prices higher?

The recent positive gold price action is attributed to inflation concerns, extreme volatility of crypto-currencies, the lower US Dollar, 10-year US Treasury Bonds and concerns around Covid-19 battered economic recovery.

International gold prices got an extra boost on June 1 as the drop in US home sales added to its appeal as a safe haven.

Experts also point out that gold has risen above $1900 as the Federal Reserve is not ready to tighten its ultra-loose monetary policy even as inflation pressures continue to rise. Gold market is benefiting as real interest rates remain in historically low negative territory. A glance at US Treasury yields makes it clear that US Fed is in no hurry to change its stance.

In its latest report reviewing Q1 2021, the World Gold Council had noted: “While the average gold price in Q1 was 13% higher YoY, it declined by 4% QoQ. The opportunity to buy at lower prices, relative to the highs seen last year, boosted consumer demand, particularly as many markets continued to emerge from lockdown and economic recovery lifted sentiment.”

A Reuters report noted that India’s gold imports in May surged more than nine-fold from last year’s low base to 12 tonnes.

Higher gold imports in May also indicate the continued surge in gold demand despite the second wave led lockdowns.

Later this week, the US Labor Department will release its nonfarm payrolls report for May. Experts say  that a disappointing nonfarm payroll could push gold prices further upside while better than expected numbers could see US dollar and yields pivot higher.

Also, the United States is contemplating putting trillions of dollars into the market for various programnes. If you put a lot of money into the market, that devalues the dollar itself, and that’s bullish for gold because it takes more dollars now to buy gold.

Anuj Gupta, Vice President (VP), Commodity and Currency Research at IIFL Securities, is bullish on both gold and silver in the near to medium term. He said over April and May months, gold was seen shining brightly gaining by almost 9% and the bullion is set for big gains going down the line.

“Lower interest rates, unstable economic growth and global inflation will push yellow metal higher. Last year, gold gave more than 28% returns and this year we expect the same,” he said.

He said gold prices are heading higher and trading at $1,910 per ounce and on domestic market it is trading at Rs 49,700 levels.

“We expect that prices will move further higher to test $1,950 in a very near term. For longer time frame perspective it may test $2,050 to $2,100 levels and on domestic market it may test 55,000 to 57,000 levels in a year and even surpass its all-time high levels of Rs 56,200,” he added