Gold Rate Falls Sharply This Week, 'Buy Gold This Diwali For 15% Upside': Says Analyst

Gold rates in India are sharply down this week, before Diwali, creating an opportunity for investors to buy gold at lower costs. Analysts at Motilal Oswal mentioned target price fold gold. The firm suggests buying gold now with Rs. 53000 as a medium-term target, and Rs. 58000 as a long-term target, for an 8-17% potential upside.

2022 has been a highly volatile year for Gold and silver prices. On the domestic front both metals on YTD basis, have given returns of 5% and -9% respectively. Geopolitics, Central banks' action, and Inflationary concerns are themes that are not only driving precious metals but also triggering volatility in other asset classes.

Today, on October 20, in India the 22-carat gold rate is quoted at Rs. 46,350, and the 24-carat gold rate is quoted at Rs. 50,560/10 grams, falling by Rs. 200-220 intra-day. Motilal Oswal in a recent report stated, "We believe that this year macro factors will have an upper hand over the move in metal prices, as tighter monetary policy scenario is not a great phase for non-yielding asset i.e. gold. To justify this analysis, we have compared Diwali month returns over the past 10 years. 2013 was the year when the taper-tantrum was announced, 2015 -2018 was a rate hike cycle, 2019-2021 was a lower interest rate zone and 2022 we are again in the rate hike scenario. During the rate hike scenario, Diwali months return for gold has been negative."

Analysts at Motilal Oswal said, "On the domestic front, gold and silver prices get a boost during the festive season. Fall in precious metal was restricted following rupee depreciation that was to the tune of ~10% coupled with the hike in basic customs duty on gold imports by 5%. As India is a price taker any movement in Comex affects our prices. The macro-economic backdrop does have an upper hand this year, major focus is on the central bank's monetary policy, inflationary pressure, and geo-political tensions."

The firm added, "If there are any changes in these factors, we could see some short covering, which could take gold prices much higher and quicker, but we feel that till the time we don't see a change in stance from major central bankers w.r.t aggressive interest rate hikes, we could continue to witness pressure on gold prices. Amidst these uncertainties, it is advisable to have gold and silver in one's portfolio. Hence, anyone who is looking to invest in gold and silver with a medium to long-term outlook can start to accumulate at these levels."