After several weeks of continued sluggishness in gold prices, investors eye the second half of the year with hopes for higher returns.
In the domestic market, festive season demand usually boosts demand for gold jewellery after July, say experts.
While the current trend in domestic gold prices is broadly determined by the international gold market, analysts await a significant improvement in buyer interest on the back ofmonsoon rains, a sign of support for rural demand.
Globally, gold prices are trading about 10 per cent off their April high due to pressure from a stronger dollar, which has risen around 5 per cent during this period.
The question is: should you buy gold at this pointHere's what to expect from domestic gold prices in the coming weeks:Abhishek Bansal, founder and chairman of ABans Group of companies, which also provide commodity trading services, among other things, expects a 10 per cent rise in domestic gold prices in the second half of calendar year 2018.
"Indian jewellery demand averages at 1,144 tonnes and 1,225 tonnes for first and second half respectively for last 5 years.
We expect to witness a similar but muted trend this year as well," he told TheIndianSubcontinent.The gold prices in the country still look expensive compared to its global counterpart due to depreciation in the rupee against the US dollar, he adds.At Thursday's closing price of 68.66 against the greenback, the rupee is down more than 8 per cent from the year's highest closing level of 63.37 (January 5).Gold and equities have traditionally shared an inverse relationship.
While the stock markets are undergoing a rally at the current juncture, gold prices are displaying a sideways trend."With first quarter earnings coming in along expected lines and a good monsoon this year, we do not expect a selloff in the equity markets," Rahul Agarwal, director, Wealth Discovery/EZ Wealth, told TheIndianSubcontinent.Here are five factors to watch out for in gold price trend:Monsoon: The narrowing down of monsoon deficit to 2 per cent from 9 per cent previously, is a positive trigger for gold demand this year, say experts.
The progress of monsoon will be keenly watched by gold investors.Corporate earnings: Reporting of April-June earnings by more companies will determine the equity market movement in the coming days.
Benchmark indices Sensex and Nifty have risen more than 1.5 per cent in the recent run to record highs.
So far this year, they have given a return of 6-8 per cent.Rupee vs dollar (INR vs USD): Persistent weakness in the rupee against the US dollar will continue to support domestic gold prices, say analysts.
They anticipate the Reserve Bank of India (RBI) to actively intervene and support the currency around the 69 level against the US dollar.
The rupee hit its lifetime low of 69.12 against the American currency earlier this month.
Appreciation in the rupee may drag domestic gold prices further down, says Mr Bansal.US Federal Reserve: The American central bank is due to release its next policy statement in September.US economic data: Investors are also watching out for second-quarter US economic growth data, which is expected on Friday.
Meanwhile, jobs data due in early August will be the key driver for a much anticipated hike in key rates by the Fed.Should you buy gold"Gold prices are expected to trade in a narrow range with a negative bias.
We expect 24 carat spot to trade in a range of 31,000-33,000 in the near term.
We do not advise to create fresh positions in gold for investment purposes," said Mr Agarwal.In domestic markets, Rs 29,200-Rs 29,000 (per 10 grams) can be good entry levels for accumulating gold, says Mr Bansal.
However, he adds that the weakness in the rupee is the risk to this view.
Appreciation in the rupee may drag domestic gold prices further down, he says.
(With agency inputs)