There is a significant rise in gold prices. Over the past five years since Dhanteras, gold prices have increased by 200 percent. According to Axis Direct, gold could yield a return of 20–25 percent by the next Dhanteras, with a target price ranging from 165,000 to 171,000 rupees per 10 grams.
Axis Direct noted that the domestic market price of gold has risen from 47,600 rupees per 10 grams in November 2021 to approximately 142,750 rupees per 10 grams. This represents an impressive increase of 24.53 percent in annual compounding.
Since the last Dhanteras, gold has shown a return of about 8 percent, which significantly surpasses the performance of the Sensex and Nifty indices. Nevertheless, gold is trading at a discount of more than 22 percent from its peak value of 180,000 rupees, and domestic prices are around 142,000 rupees per 10 grams.
Geopolitical tensions in the Middle East, the strengthening dollar, and interest rate hikes by the Federal Reserve are putting pressure on prices, raising concerns about the sustainability of gold's long-term upward trend. Previously, gold and the dollar index had an inverse correlation. The recent 4 percent rise in the dollar index has strongly impacted gold, confirming the trend that gold typically performs poorly when the dollar and bond yields rise.
Despite this, gold's growth is supported by consistent central bank purchases and inflows into ETFs. It was observed that current gold prices look attractive to investors as they have fallen by more than 20 percent from their peak. This presents a good opportunity for long-term investors who missed the rally to gradually add gold to their existing portfolios.
Internationally, the price of gold is set in US dollars, and India imports most of its gold requirements. Consequently, the exchange rate plays a crucial role in shaping domestic gold prices. When the rupee weakens, more rupees are required to purchase the same volume of gold, even if international prices remain unchanged. This increases the cost of imported gold and supports domestic prices.
From a technical perspective, Axis Direct reported that MCX Gold faced strong resistance at the 160,000 rupee level, which has gradually turned into a supply zone as prices have repeatedly attempted to stay above this level over the past seven months. Furthermore, a weekly close below the 20 EMA in September would weaken the bullish outlook.
