Gold Expected To Hit New High In 2021, Silver Rs 90,000

In 2020, gold prices were up by about 27% while silver gained around 50%. In August, gold price in India touched an all-time high of Rs 56,200 per 10 grams on MCX, while silver rates also almost touched Rs 80,000 per kg.

In global markets, gold prices finished 25% higher for the year in 2020, logging its biggest annual gain in a decade.

After strong gains in 2020, analysts expect the precious metals to see further gains in 2021. The major factors supporting this forecast include:

• weakness in the US dollar- when the price of the American currency declines relative to other currencies around the world, the price of gold tends to rise in US dollar terms.
• low-interest rates- which makes non-yielding gold a more attractive bet
• inflation risks are high due to liquidity induced by low-interest rates. Gold is a hedge against inflation.
• vaccination plan for large populations still remains uncertain, keeping large-scale normalcy in economic activity still far from sight.

Rising COVID-19 cases around the globe have heightened uncertainty on the economic revival, causing investors to make safe-haven bets for bullion and silver, say the experts at ICICI Securities.

The analysts at the brokerage house are bullish on the yellow metal and expect rates to move towards Rs 65,000 and silver to Rs 90,000.

"Investments into silver-dependent greener technologies such as solar panels and electronics, are rising around the world along with broad-based dollar weakening that is making silver cheaper for holders of other currencies. In addition to that, rising Coronavirus cases around the world are raising uncertainty on an economic revival and increasing safe-haven bets," says ICICI Securities.

Philip Newman, MD of Metals Focus, in an interview with CNBC-TV18 said that he believes there is further upside for both gold and silver in the coming months. He said that gold to set new highs in US dollar terms.

"We do think that it will break through $2,000 again and as we go through this year it is likely to get to $2,100 and perhaps even higher as well," he said.

Talking about silver rates, Newman said that "the gold-silver ratio is down to around 70 levels. We think the ratio will fall further. Silver, being a smaller market, does tend to outperform gold to the upside. So we think we could comfortably get to $30 as we go through this year."

Gold prices still have the scope to increase by 20 to 25% in 2021-22 said Prof Arvind Sahay, Chairperson of IGPC in another CNBC-TV18 report.

Other experts are of the opinion that irrespective of the rise or fall in the precious metals' prices, one should invest a small percentage of their investment portfolio in gold/silver as a diversification strategy.

Disclaimer

The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.

About the author

Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.