Gold Prices Set for Biggest Daily Gain Since 2008: Should You Buy?
Summary of Market Recovery
Following a tumultuous period, gold and silver prices rebounded sharply on Tuesday, marking gold’s potential for its largest single-day gain since 2008. This resurgence reflects renewed buying interest at lower price points and strategic short covering post a significant market correction.
Key Highlights
– Recent Performance: After a two-day sell-off, spot gold recovered from its recent lows, surpassing $5,000 per ounce. Silver also made a strong comeback after suffering its largest one-day drop on record just last week.
– Historic Crash: Last week was particularly brutal for the precious metals market:
– Gold plummeted nearly 10% in a single session, marking its steepest drop since 1983.
– Silver saw a staggering 27% decline in one day.
– Over just two trading sessions, gold fell over 13%, while silver dropped nearly 34%, triggering widespread margin calls.
Factors Influencing the Rebound
– Market Dynamics: Tuesday’s recovery can be attributed to renewed interest from investors and technical factors suggesting a bounce back from deeply oversold levels.
– Industry Insights: According to Jateen Trivedi, VP-Research Analyst (Commodity and Currency) at LKP Securities:
– The spike in overseas prices catalyzed positive momentum in domestic markets.
– MCX gold rose above ₹151,000, gaining almost ₹8,000 intraday, driven by safe-haven buying.
Future Outlook for Gold Prices
– Economic Indicators: Upcoming US non-farm payroll and unemployment data are critical indicators affecting the Federal Reserve’s outlook on rates, which could introduce further volatility in bullion prices.
– Technical Support and Resistance:
– Immediate support for gold is noted at ₹145,000, while resistance lies around ₹155,000.
– Analysts are cautiously optimistic, with Hareesh V, head of commodity research at Geojit Investments, stating that gold and silver are beginning to stabilize post last week’s historic sell-off.
Investing Considerations
– Strategic Analysis: Aamir Makda, commodity and currency analyst at Choice Broking, mentions:
– Gold’s recovery from recent lows indicates potential continued upwards momentum.
– A breakout above ₹154,000 could push prices further into higher resistance zones.
– Market Sentiment: Despite previous volatility, analysts remain broadly positive about the long-term prospects for precious metals, suggesting that the recent corrections were technical rather than indicative of fundamental shifts.
Conclusion: Should You Buy Gold?
With gold prices exhibiting a significant rebound after a historic crash, the precious metal appears to be at a crossroads. Given the current market dynamics, technical support levels, and analyst optimism, now may present a compelling opportunity for gold investors. However, it’s crucial to stay informed about ongoing economic indicators and market sentiment, as these factors will influence future price movements.