Gold price prediction: Where are gold prices headed in the near term? Why investors should not chase the rally

Gold price prediction : Gold prices are likely to be volatile in the coming days and instead of chasing the rally, investors should look to buy on dips, says Praveen Singh, Senior Fundamental Research Analyst- Currencies and Commodities at Mirae Asset Sharekhan. The analyst shares his views on gold price outlook and what levels investors should watch out for:

Gold Performance:

• On October 20, spot gold, despite easing US-China trade tensions and subsiding bad loan concerns involving US regional banks, quickly reversed its nearly 0.75% decline to $4219 in the Asian session to rise sharply to $4355 in the US session. Bad loan concerns eased as the US regional banks posted encouraging results.
• Although on October 20, Trump threatened China with 155% tariff rate if no deal by November 1, gold had already rallied to its session’s high by then.
• At the time of writing this article, spot gold was trading with a gain of 2.11% at $4345. The MCX December gold contract was changing hands at 103,443, up 2.70% for the day.
• Earlier, the yellow metal extended its weekly winning streak to the ninth consecutive week as it closed with a weekly gain of nearly 5.75% at $4251 in the week ending October 17.

Data roundup:

• Chinese data on October 20 were largely encouraging as Q3 GDP at 4.8% annualized rate came in line with the forecast, while industrial production at 2.9% and retail sales data at 6.5% topped their respective forecasts of 3% and 5%.

US-China talks:

• US Treasury Secretary Bessent and Vice Premier He Lifeng will have the next round of trade talks next week in Malaysia, which will prepare ground for presidential meetings.
• US President is set to meet with Chinese President Xi in South Korea in a couple of weeks. Trump has listed rare earths, fentanyl and soybeans as top US issues with China. He wants China to resume soybean purchases

Dollar Index and yields:

• At the time of writing this article, the US Dollar Index was noted at 98.52, up nearly 0.10% for the day.
• Ten-year US yields were hovering around 2.99%, while two-year yields at 3.46% were up by nearly one-bps.

Gold ETF holdings and COMEX stocks:

• As of October 17, total known global gold ETF holdings stood at 98.23 MOz, a new cycle high, as holdings rose for the seventh straight week.
• Gold ETF holdings have recorded a net inflow of 15.38 MOz YTD, which amounts to a net inflow of 478 tons this year so far.
• Of late, huge ETF inflow has played a crucial role in pushing up gold prices.
• COMEX gold stocks stand at 39.10 MOz, a decline of 13.26% from the record inventory level of 45.07 MOz noted in April.

China's fourth plenum:

• The Chinese Communist Party is holding the fourth plenary session of its 20th central committee in a four-day closed-door meeting from October 20 to 23. A proposal of the CCP Central Committee on formulating the 15th five-year plan for National and Social Development will be discussed at the plenum and if approved, it will be approved at the 'Two Sessions' - China's annual parliamentary and political consultative meetings - in March 2026.

Upcoming data:

• Major US data on deck this week include Philadelphia Fed non-manufacturing activity (October 21), weekly job data (October 23), existing home sales (October 23), CPI (October 24), S&P global US PMIs (October 24), University of Michigan sentiment and inflation expectations (October 24). Some of the data may get delayed due to the ongoing partial shutdown of the US government.
• Eurozone's PMIs will be out on October 24.
• Focus will be mainly on the US CPI data as traders try to assess the Fed’s monetary policy trajectory. Hot inflation data will affect rate cut chances.

Gold Price Outlook:

• Given the fact that both equities and gold have been rallying mostly together, the current gold rally is driven mostly by ETF inflows and late buyers as traders focus on the FOMC monetary policy decision due on October 29 wherein the Fed is expected to cut rates by 25 bps. It is to be noted that both markets and the Fed expect two more rate cuts by the year-end with the next rate cut to take place in December.
• US-China tensions may also be driving the rally as China has yet to make its stand clear, though risk assets remain well bid.
• Trump’s China threats on Monday did not dent the risk sentiments.
• Gold may see some correction ahead of the US CPI and PMI reports to be released on October 24 as hot inflation data may hurt December cut chances as October rate cut is almost a done deal.
• In the near-term, gold is expected to be highly volatile due to US-China headlines.
• Buying the dips is preferred over chasing the rally at this point, though the metal may quickly surge to $4500 in case US-China tensions escalate.
• Support is at $4200/$4116/$4000. Resistance is at $4400/$4500.
• We look for a target of $5000 in a year’s timeframe.

Silver: Buy the dips

Performance:

• At the time of writing this article, spot silver was trading with a gain of 0.50% at $52.17.
• Spot silver closed with a weekly gain of 3.42% at 51.92 in the week ending October 17 as it extended its weekly winning streak to the ninth straight week, which mirrors the gold’s streak.
• Silver, supported by an extremely tight market due to ETF led demand, has rallied over 40% since August 1 as it hit a fresh record high of $54.47 on October 17.

Global Silver ETF holdings:

• Silver ETF holdings stand at 823.23 MOz as holdings slid from cycle high of 833.41 MOz as noted on October 14.
• Total known silver ETF holdings have risen 15.26% YTD as ETF inflows this year amount to a net inflow of 3,390 tons of silver.

Silver is now the largest cost component in a solar module production

• After steep price increase, silver is now the largest cost component in solar module production as it overtook aluminum and PV glass. As per Bloomberg calculation, current silver price translates to over 17% of the per-watt price of solar modules.

Silver Price Outlook:

• Silver may see profit booking ahead of the US CPI and PMI reports. However, overall, outlook remains constructive.
• Considering the steep rise in silver prices since August 1, it is advisable to buy the dips rather than chase the rally.
• Support is at $50.62/$50/$46. Resistance is at $55/$56.10.
• If risk appetite remains reasonably healthy, silver may rise to $56/$58 level by the year-end.
• We expect the metal to reach $75-$100 in next three to five years as we look for a target of $60-$65 in a year’s timeframe.

** Because of changing domestic premiums, it is advisable to focus on international prices.

(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)