Gold Price and Outlook I Details explained by ICICI Securities

Gold prices opened slightly higher with a gap on Tuesday and rose further during most of the session till a high of Rs 44963. Prices recovered slightly in the last session as a pullback in US Treasury yields added some lustre to the metal after it hit almost a one year low in the previous session. ICICI Securities expect gold prices to recover further towards Rs 45300 level in the short-term.
 
As a sharp reversal was seen in domestic equities in the second half, the rupee recovered, appreciating further. Call writers are becoming active in OTM strikes but as the dollar index remained above 92 levels we feel the rupee could consolidate. The dollar-rupee March contract on the NSE was at Rs 73.14 in the last session. The open interest fell by 1.4% for the March series. Intra-day strategy is to Buy US$INR in the range of Rs 73.10 – Rs 73.12.  

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The daily price action formed a bull candle with a long lower shadow, indicating elevated support base at 14900 as the fag end buying demand helped the index to recover 200 points from the day’s low (14925). Key point to highlight over the past three sessions is that the index has managed to hold the intermediate support of 14900 despite volatile global cues, highlighting inherent strength.  Going ahead, we expect the index to challenge last week’s high of 15272 and gradually head towards 15500 in coming weeks. The revived traction in banking and IT sector would drive the index higher as together it carries 55% weightage in the benchmark.
 
Therefore, capitalising on dips as an incremental buying opportunity in quality large caps would be the prudent strategy to adopt as  the broader positive structure remains intact. The broader market has taken a breather after recent outperformance and is currently performing in tandem with the benchmark. However, we expect broader markets to maintain the positive correlation with their global peers and accelerate the relative outperformance. Currently, the Nifty midcap index is hovering around 52 weeks EMA. Meanwhile, the small cap index is still 14% away from its life-time highs. Hence, we expect small caps to witness catch up activity within broader market space