March 29, 2023 (MLN): The first quarter of 2023 proved to be a profitable period for gold owners/investors as the precious metal showed a remarkable increase in its value in local bullion.
The price of gold rose by around Rs24,900 or 13.57% YTD per tola in the first three months of the year. As of today, the yellow metal is trading at a high level of Rs208,857 per tola compared to Rs183,900 per tola at the end of 2022.
The main reason for the strong performance of gold was the uncertainty and instability in the economy which led the PKR to fall by Rs57 or 20.07% in the first quarter of FY23. There has been also a shortage of dollars in the open market, making it harder for businesses and individuals to access foreign exchange. Moreover, the macroeconomic situation has been deteriorating, accompanied by high inflation.
These factors made investors look for alternative assets that could preserve their wealth and hedge against risks. Therefore, the demand for gold increased in local bullion throughout the year.
Earlier, gold had breached its all-time highs in PKR terms and is expected to remain strong in the second quarter of the year. However, gold has not yet reached its peak in USD terms. To examine this trend, the XAUUSD chart is discussed below in the article.
As markets continue to reel from recent banking crises in the United States, investors are turning to the safe haven asset- Gold. With bullish options on the SPDR Gold Trust surging, is it time to hop on the gold bandwagon?
Call options on SPDR Gold Trust have almost tripled in the last few weeks, indicating growing optimism about the precious metal’s price performance, as reported by Bloomberg.
Investors are looking for alternative investments that can help them hedge against potential losses in traditional markets.
In recent weeks to months, the price of gold has been trending upwards, reaching its highest level in almost a year, knocking at multi-year resistance close to all-time highs.
However, the question remains whether it is a good time to invest in gold. Does the market sentiment, supported by call options and general market volatility, provide a good analysis of whether to invest?
To address this question, a combination of technical and fundamental analysis will be discussed.
On the technical side, as shown in the weekly timeframe chart above, gold has been rejecting heavily from its multi-year resistance (green box), which is around $1990-$2000 per ounce.
To achieve a price breakthrough and reach new all-time highs, gold needs to get a weekly candle close above this critical level.
Once this level is breached, the market will likely enter a period of price discovery and experience a significant rally. This level has acted as a multi-year resistance and breaking through it will be a significant achievement.
From a fundamental perspective, examining the summary of the latest FOMC meeting, the Federal Reserve announced a 25bps increase in interest rates, citing the need for additional policy firming.
Despite recent banking stresses, the Fed Chair remains hawkish, noting that the possibility of credit conditions tightening due to banking stresses offsets the possibility of higher rates.
Additionally, while inflation expectations are well-anchored, the Fed Chair warns that reducing inflation may require a period of below-trend growth, suggesting a bumpy road ahead.
Ultimately, the decision to invest in gold comes down to personal analysis and risk tolerance. While gold’s historical performance as a safe haven asset is promising, investors should carefully consider both technical and fundamental factors before making any investment decisions.
Copyright Mettis Link News
Posted on:2023-03-29T14:48:24+05:00
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