Gold prices seem to have entered a long-term bull phase, having increased by 11.5 per cent in just a month, in one of the fastest rises seen in recent times. The spike has taken the metal to its highest in six years in the international market.

In India, prices have hit an all-time high, with a mammoth 12 per cent rally, the highest month increase since March 2016. Due to this, the demand for new gold has tapered, while the sale of old metal and jewellery has reached a peak. Analysts, however, advise caution in the short term.

The rally reminds one of the bull run of last decade, when gold went up nine times from 2001 levels, to trade above $1,900 in 2011. However the subsequent fall brought the yellow metal down by almost half, with support at $1,000 levels.

This time the rally has been combination of factors such as the European Central Bank’s (ECB) unexpected move to turn more dovish than the consensus, followed by a similar move by the US Fed, and Iran's shooting down of an unmanned US drone.

Noted US-based analyst Nigam Arora, who has also authored the Arora report, said, “For the short-term, RSI on both daily and weekly charts is overbought. This indicates a high probability of a pullback in the short-term if the news flow stops being supportive. However, overbought markets can easily become more overbought if there is further good news.”

Gold enters long-term bull market but analysts urge short-term caution
Market experts now eye the crucial meeting between US President Trump and Chinese President Xi Jinping coming Saturday, when leaders of the G-20 economies congregate in Osaka on June 28-29.

Arora said, “If the two sides strike a good long-term deal (to put an end to trade war), there is a big chance gold will fall by as much as $100 in a short period of time. On the other hand, if the acrimony between the two sides worsens drastically and Trump goes ahead with additional tariffs, gold moving by as much as $200 over a period of a few days cannot be ruled out.” For the short term he has advised caution....BS