GOLD OUTLOOK: Gold prices may have bottomed out. Is it the best time to invest?

NEW DELHI: Gold has always been one of the most favoured investment options for Indians. At a time when inflation is likely to spike, it makes sense as well, given that the yellow metal has traditionally been used as a hedge.

But as the world economy gradually came out of the Covid crisis and yields rose, gold prices started seeing a decline. Rupee’s appreciation against the dollar, higher ETF outflows seen in Q4, reduction of bullish bets by speculators and a cut in the import duty also created pressure points for gold prices.

But the question is, has the price of gold bottomed now? Some analysts say, yes. So, is it time to pile on gold? Their answer: A little wait will be good.

“Now is the time to look out for an opportunity to do fresh investment. The $1.9 trillion stimulus package that is likely to be passed in the US could lead to pressure on the US dollar, which would support gold prices. Locally, we could also witness festive reactions to buying spree in the metal. This was lacking so far due to higher prices,” said NS Ramaswamy, Head of Commodities, Ventura Securities.

On Monday, the Sovereign Gold Bond issue opened for the subscription that was priced lowest in the last 10 months. This is expected to attract buying as the instrument not just provides capital appreciation but interest as well.

Data from the physical gold market is also bullish. Physical gold demand in India gained momentum last week as retail buyers and jewellers lapped up bullion at near eight-month low prices, while Singapore continued to see steady interest for both gold and silver.

Ramaswamy said, from the present levels of Rs 46,700, we could expect a price recovery to Rs 48,800. However, it should be noted that the bearish trend continues and only on a certainty of breakout above a closing price of Rs 47,600, could there be a trend change in gold.

MCX April futures of gold were trading at Rs 45,908. In the spot market, purest quality gold was trading at Rs 45,976, according to India Bullion and Jewellers Association.

But the analysts agree that there is some clarity needed on the stimulus front as well as Covid-19 situation across the country. Thus, in the near term, some pressure in price may exist.

“RSI is hovering near 30, showing that the market is in oversold condition. Traders should wait for the bounce near Rs 46,400 for the sell position. In this case, Rs 46,870 will be the stop loss and Rs 45,200 is the target price,” said Kshitij Purohit, Lead – Commodity, CapitalVia Global.

In silver, meanwhile, some buying could be seen in the near term. Silver is trading volatile nowadays and the market is not sustaining below Rs 67,000 on a closing basis.

“I believe that the silver market is giving enough time to accumulate to buy from lower levels. The US government will pass a huge stimulus and then a massive amount of industrial metal will start to push silver up,” said Purohit.

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