Gold tops $1,817 an ounce for first time since Feb, experts foresee beginning of new upcycle

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International gold prices climbed over $1,817 on 6 May for the first time since February, led by a pullback in the dollar and Treasury yields. In fact, gold as an asset class is poised to see its best week in five months.

The weaker dollar and US Treasury yields dropping below 1.6% helped gold prices to surge above $1,800.

Experts are looking at this breakout as an indication of further upside as lower yield makes gold more attractive. Also, the dollar index slipped to a one-week low making gold less expensive for holders of other currencies. They also believe, despite the economic optimism, Federal Reserve policymakers seem unlikely to budge on their accommodative stance yet and investor inflation fears should boost gold.

Back home, gold futures contracts for delivery in June rose as much as 0.36% to hit an intraday high of Rs 47,770 on the Multi Commodity Exchange (MCX). Silver futures rose 2.85% or Rs 1,981 to Rs 71,600 per kg this morning. However, towards the evening most of the gains were wiped out with gold trading flat at Rs 47,600 per 10 gm on MCX and Silver slipping slightly to trade at Rs 71,473.

Speaking on the outlook on gold prices, Anuj Gupta, Vice President, Commodity and Currency Research at IIFL Securities said, “Weakness in the dollar continues to support the gold prices. Increasing physical demand followed by central banks being net buyers in gold this year are further supportive of gold prices.”

He also said that uncertainty on economic recovery from the pandemic amid the second wave is increasing the demand for the yellow metal as a safe haven asset.

On the domestic front, Gupta believes gold prices to surge higher and test Rs 48,300 -48,500 levels soon.

Experts see the momentum in gold to continue for the rest of 2021 as they believe gold prices may re-test the record highs of Rs 56,200 by Diwali or year-end.