Gold prices are likely to cross Rs 34,000 per 10 gram during Diwali, against the existing rate of Rs 31,000 per 10 gram on the back of weakening rupee and geopolitical unrest that would keep the yellow metal more appealing than it was before. Moreover, with the trade war brewing along with rising crude oil prices,  inflation might increase further pushing gold prices up. Gold is considered as a hedge against movements in the US dollar and inflation.

Gold prices are likely to hold in the range of Rs 30,000-34,000 per ten grams until Diwali in the domestic market, and internationally the yellow metal might be in USD 1,260-1,400 an ounce level, Commtrendz Risk Management director Gnanasekar Thiagarajan.

He added, “Price would have absorbed the effect of rate hikes and rate hikes would only confirm inflationary expectations, which could increase the appeal for bullion as an inflationary hedge then. And with domestic currency poised to weaken further prices could test previous highs around Diwali.”

In India, gold on June 8 closed at Rs 31,010 per 10 grams and while in New York it closed at USD 1,302.70 an ounce.

“With more rate cuts, the dollar could eventually come under pressure as cost of doing business increases in the US. So, I see the possibility of investors moving towards gold by the end of the second quarter in a big way,” he added.

Kishore Narne, Associate Director at Motilal Oswal Financial Services, said, “Currently the scenario appears to be changing from what has happened over last couple of years as equity markets at the top started to wobble, weakening currencies on the back of trade war, rising inflation with commodity prices driven by rally in crude oil, still lower single digit interest rates make a perfect scenario for a gold rally. We expect gold to rally 30-35 per cent over the next two years.”

“We advise investors to have around 8-10 per cent gold as part of their conservative portfolios and around 15 per cent in aggressive portfolios as part of their asset allocation strategy.”

(With inputs from PTI)