Gold prices poised for a 6-month winning run — first time in 23 years: Should you invest amid this historic rally?
Gold prices have been caught in a strong bull run this year, supported by multiple factors—including a weaker US dollar, expectations of rate cuts by the Federal Reserve, and recession fears triggered by US-imposed global tariffs.
In India, where gold has crossed the ₹ 1,00,000 per 10 grams mark, the rally gained fresh momentum amid renewed geopolitical tensions between Iran and Israel. Although prices have eased slightly from record highs, they remain elevated and are poised to close higher for a sixth consecutive month.
The US market shows a similar trend. Spot gold prices in the US closed higher for the fifth month straight in May, a streak last seen in May 2017.
The yellow metal is already up over 3% in June, and here's where it gets interesting: if gold ends positive in June, it would mark a rare six-month winning streak, last witnessed 23 years ago, in May 2002, according to a report by Axis Securities.
In the past 75 years, such a streak has occurred only 13 times, and history suggests this bodes well for long-term investors. Data shows that over the next 12 months, gold prices rose about 85% of the time, delivering an average return of nearly 50%. Looking ahead two years, the win rate remained strong, with average gains nearing 100%.
"The takeaway here is that the six-month winning streak has been a solid signal for long-term investors to allocate more of their wealth to Gold as the purchasing power of the dollar erodes, in turn triggering the slow but evident process of global de-dollarization," Axis Securities said.
Apart from historical, the fundamental backdrop for gold also remains favourable.
Carsten Menke, Head Next Generation Research, Julius Baer, said barring a significant economic impact or a spreading in the region, the gold market is likely to lose its interest in the conflict sooner or later, as suggested by similar events in the past. Nonetheless, Menke sees the conflict as an element that is supporting the prevailing bullish mood in the gold market, while fundamentals remain favourable.
"Demand from safe-haven seekers should stay strong amid prevailing economic and political uncertainties. Buying from central banks should stay strong as well, considering their desire to be less dependent on the US dollar as a reserve currency. We reiterate our Constructive view on gold against this backdrop," he added.
In the short term, US gold prices are primed to reach the $3,600-$3,800 zone, where Axis Securities said it would advise swing traders to book profits since it believes the dollar is close to reversing its decline. On the downside, $3,245 is critical – anything under that, and a bigger drop below $3,000 becomes a real risk, it added. In summary, all eyes are on $3,289 for between now and month-end.
The current trading range for gold is seen between ₹ 98,500 to ₹ 1,00,500 in the near term, according to Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities. US Fed's interest rate decision, geopolitical tensions between Iran and Israel and progress in global trade negotiations are expected to drive volatility and set the directional tone for gold, he opined.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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