Gold below Rs 60,000! Time to buy yellow metal after Rs 2,500 correction?

Gold prices have remained range-bound for quite some time. The yellow metal is trading below the key psychological levels of Rs 60,000 per 10 grams. The yellow metal has remained under pressure after it saw a strong demand in the previous month.

Gold saw some strong buying action in the first quarter of the new fiscal year and scaled highs of Rs 61,800 in the beginning of the previous month, but the yellow metal has corrected more than Rs 2,500 per 10 grams on the back of stronger US Dollar, US debt ceiling concerns and profit booking by the traders.

Gold prices are hovering around Rs 60,000, as there are remaining sidelined ahead of the US Fed meet scheduled on June 13, said Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions (RSBL). "There is a lot of speculation about whether the FED will pause the Interest Rate in the June meeting or not after 10 consecutive rate hikes," he said.

After witnessing a big bull run in the first quarter of this calendar year, gold showed some profit booking from its high amid stronger dollar and a pickup in treasury yields but we think now gold is making its base around Rs 60,000 for next bull run, said Rahul Kalantri, VP- commodities at Mehta Equities

Moreover, summer is traditionally a weak season for the yellow metal, according to the market analysts as there are no near term key triggers to boost the demand for the yellow metal. Also, the buying in the global equity markets has also eased the outlook for the safe-haven buying of precious metals.

The upcoming US Fed meeting outcome might show a clear picture over rate hikes, impacting the gold prices. Dollar index is not able to sustain levels of 104.50, which is a big trigger for gold movement, said Kalantari. "US inflation and US unemployment numbers may lead towards an interest rate pause statement by the Fed, which will give a boost to gold prices," he said.

In the domestic market RBI intervention to provide support to Indian currency might hurt gold prices but we continue to be bullish on gold until it breakdown below Rs 58,600 level whereas on the upside it may touch around Rs 61,440 and above this next level may be Rs 62,500 and Rs 63,650, Kalantari added.

This new shift in interest rate expectations is making it difficult for gold to rise higher because it is supporting the US dollar, which is trading at a three-month high, said Kothari. "If the gold breaks its near term support, it may fall to Rs 59,200-58,400," he adds.

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