Gold prices hover near three-week low ahead of Dhanteras: Will it add sparkle to your Diwali celebrations?

The timing of these figures is crucial as they precede Dhanteras, a day highly regarded for gold purchases in India, where consumers traditionally invest in the precious metal.

A series of statements from Federal Reserve officials this week have struck a balanced tone regarding the central bank's future decisions. However, they emphasised their focus on economic data and the impact of rising long-term bond yields. Jerome Powell refrained from commenting on monetary policy or the economic outlook in his prepared remarks during a conference on Wednesday. He is scheduled to speak at another conference later in the day, as per Reuters.

City Index senior analyst Matt Simpson was quoted as saying in the report, "He'll probably try and maintain the higher-for-longer narrative because it's not within their interest to admit to markets that cuts might be coming. Gold would have the potential to retest and break above $2,000, but now is not the time."

The recent surge in gold prices above $2,000 per ounce was attributed to escalating tensions in the Middle East, which had driven demand.

Rahul Kalantri, VP Commodities at Mehta Equities, anticipates that gold prices will remain volatile in the session. Gold has support levels at $1940-1928 per ounce and resistance levels at $1964-1975 per ounce. In Indian rupees, gold finds support at ₹60,000-59,770 per 10 grams, and resistance at ₹60,510 and ₹60,690 per 10 grams.

A recent study by Windmill Capital suggests that in times of geopolitical uncertainty, gold is expected to, however, trend higher in the short term, citing historical data showing gold's average annual return of approximately 11% over the last two decades. Morgan Stanley also sees potential for substantial returns, with a medium-term target of ₹63,000.

Naveen KR, Smallcase Manager and Senior Director at Windmill Capital, recommends investing in portfolios that include both gold and equity. Gold's performance can offset the poor performance of equities during unfavorable macro events or persistent high inflation. Historically, gold has proven to be an efficient asset class that provides safety, especially during market turmoil.

Gold also acts as an efficient hedge against inflation, outperforming equities during periods of high inflation. Therefore, it can serve as a valuable addition to a diversified investment portfolio. It's advisable for investors to ensure that they don't allocate more than 10% of their total portfolio to gold, whether in physical or digital form, as recommended by experts.