'Gold Prices May Rise by Rs 18,000': Bullion Experts Suggest Buy-Sell Strategy

Even as the gold prices have fallen by as much as Rs 4,000 following the import duty cut in the Union Budget 2024-25 and amid pressure on international prices ahead of the US elections, experts said it is a good buying opportunity in India. They said investors can buy gold now and sell it at $72,000 as prices may come under pressure at that level due to global cues.

“The recent dip in gold prices to around Rs 70,000 from Rs 75,000 presents a significant buying opportunity. With New York-based Comex gold recently hitting $2,500 for the first time, this drop marks the largest single-day decline in rupee terms, falling by Rs 4,200. Buyers should consider increasing their allocation to gold, especially given the potential for higher capital gains tax on equities, which could reduce returns in that asset class,” said Jateen Trivedi, vice-president of research (commodity and currency) at LKP Securities.

Currently, 24k gold prices in Delhi stand at Rs 68,100 and 67,800 per 10 grams for 999 and 995 purity. Silver currently stood at 82,000 per kg.

On the outlook, Sarvendra Srivastava, a global market strategist and researcher, said, “In the spot market, the MCX rate is not the real price of gold, as it also involves currency exchange rate and duties. Currently, gold at the London bullion exchange, from where the entire whole takes prices, is 3,000 but we are at around 2,400. So, there is a scope for gold to rise Rs 18,000 in order to bridge the gap of these 600 points.”

What Should Be Your Buy-Sell Strategy?

Jateen Trivedi said, “Accumulating gold at current levels is advisable.”

On selling, he said the gold price may fall again after touching Rs 72,000, as it faces pressure on the US-based Comex. Hence, investors may consider selling at that level.

“Consider selling gold when prices reach around Rs 72,000, which is expected to act as a major resistance level. This aligns with Comex Gold facing resistance at $2,500-$2,525 until interest rate cuts start being considered. In the long term, as interest rates are expected to decrease internationally, central banks’ actions will likely boost gold buying, making it a favorable investment for the future,” Trivedi added.

The US Federal Reserve will review its interest rates on July 30-31 and the outcome will be announced on July 31. Any fall in interest rate will make gold cheaper in India.

The Budget 2024’s Impact on Gold: How Investors Should Go About?

The Union Budget 2024-25 announced to import cut duties on gold and silver to 6 per cent, as compared with 15 per cent earlier. It also announced to reduce long-term capital gains (LTCG) tax to 12.5 per cent. It, however, has removed indexation benefits to adjust for inflation for sellers. Here’s what the vice-president of LKP Securities said:

LTCG with Indexation Benefits: The recent budget announcement lowering the capital gains tax to 12.5% for holdings over two years (down from 20%) and introducing a Rs 1,25,000 exemption is a positive move for retail investors. These changes make long-term investments in gold more attractive.

Import Duty Cut: The reduction in import duty on gold will help lower prices, benefiting long-term investors. Retailers should focus on the long-term benefits of holding gold, taking advantage of the lower capital gains tax and import duty cuts to maximise returns, Trivedi said.

Conclusion

Given the recent price drop and favorable budget changes, gold buyers should:

Increase Allocation: Utilise the current price dip to buy gold in lump sums.

Strategise Selling: Aim to sell around Rs 72,000, considering long-term positive outlooks driven by expected interest rate cuts.

Leverage Tax Benefits: Capitalise on the reduced capital gains tax and import duty cuts to enhance long-term returns on gold investments.