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Will the festive season 2022 reverse the trend? Find out what analysts are saying

Gold demand during festive season 2022: As the festive season begins, the shopping spree is in full swing. Gold is a precious metal that also attracts buyers from time to time. The yellow metal has been under pressure for some time in the country due to expectations of further interest rate hikes from the US Federal Reserve and a strong dollar. The upcoming season offers an opportunity to increase demand. Here’s what experts say about the demand for gold in the upcoming festive season:

Gold prices in India are witnessing a fall from end of February 2022 Since then there has been a downward trend with some ups and downs At the end of February, 24 carat gold of 99.9 per cent purity was priced at Rs 55,000 per 10 grams in India. Its decline began in India after the start of the Russia-Ukraine war. On Thursday, gold prices touched around Rs 49,300 per 10 grams on the MCX. Gold is currently weak below $1,660 in New York.

Madhavi Mehta, assistant vice-president (commodity research) at Kotak Securities said, “Aggressive monetary tightening by the US Federal Reserve boosts the dollar, while China’s economic struggles dampen consumer demand, leaving gold struggling for direction. ETF (exchange-traded fund) investors continue to drift amid liquidity and a bearish outlook.”

Mehta added that gold may not gain much traction unless central banks slow down their tightening regime and hence, prices may remain under pressure ahead of the upcoming festive season.

Harish V, Head (Products), Geojit Financial Services said, “Gold prices are under pressure due to expectations of further interest rate hikes from the US Federal Reserve and a strong US greenback. However, domestically, a weak Indian rupee and steady physical demand may offer downward support to prices. A possible pick-up in demand ahead of the main festive and wedding season, which will fall in the coming months, is likely to bring some shine back to Indian gold.”

To control inflation, the US Federal Reserve raised the key interest rate by 0.75 percentage points. With a 75-basis-point jump, precious metal prices in India fell.

Precious metals, including gold, recorded little change ahead of the US Federal Reserve’s policy meeting. Yellow metal prices have increased in India.

Gold traded positively on Thursday as the MCX and COMEX (New York-based Commodity Exchange) dollar index rose. On the MCX, gold was above Rs 49,300 per 10 grams after opening while on the COMEX gold was weak below $1,660 per ounce and the dollar was above $111.50.

In afternoon trade, profit-booking was seen in the dollar index which gave COMEX gold a spike to $1675 and the rupee fell below Rs 80.75 on the back of FII selling, helping gold rise above Rs 49,850 on the MCX.

“As long as COMEX gold remains above $1650, gold can be seen as a buy-on-dip asset in the current global hyperinflationary macroeconomic environment,” said Jatin Trivedi, vice-president (research), Geojit Financial Services.

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