At the MCX gold for June delivery settled on Tuesday (May 4, 2021) below Rs. 47000 at a price of Rs. 46873, while in the physical market 22K and 24K gold in the National Capital is available for Rs.44520 and Rs. 48570 per 10 gm, respectively. Now as it is time and again suggested that amid a whole lot of uncertainties that continue to grip the world, yellow metal shall rise. Now we shall discuss here is it the right time and correct price level to get into gold investment.
Here we segregate the situation considering global and domestic factors that are at play:
Domestic factors at play:
1. Gold available at a discount for the first time:
Against the premium charged a week back, amid crisis due to the Covid 19 second wave, dealers in India are offering a discount of $2 per ounce this week versus the domestic official prices.
2. Equities volatile:
Not far ago, we can talk here on equities volatility seeing the market action on May 4, 2021 wherein Indian indices after having started on a firm note became flat and later ended down by 1 percent owing to unabated Corona and IPL suspension. In such a scenario, people flock to other investments which serves as a hedge against position in other assets as well as to diversify their portfolio. So as the situation is currently, while any steep correction in Indian equities is ruled out, volatility shall be staying unless corona situation improves in the country.
3. Indian economy recovery again threatened owing to Covid 19 second wave:
Currently the country is grappling with the worst case situation of Covid 19 with over 3 lakh cases being reported daily and over 3000 deaths. And this again points to disruptions in economic activity. It is at this time again when gold gains sheen i.e. downward spiral is again a positive for gold.
1. Interest rate outlook by the US Fed and other major central banks continue to be dovish:
In its recently concluded Fed meet, the US central bank kept the short term interest rates anchored near zero and declined to let up on its easy monetary policy and this stance works in favour of gold.
2. Cryptocurrencies relentless rally partly driven by speculations:
Of late there has been diversion of some of the funds from gold to bitcoin and other digital currencies which have sharply run up on trust and global institutional acceptance. But not to forget as losses posed by cryptos can be huge, holding gold in one's portfolio always makes sense. Being a store of value, it serves as a hedge against risk from other assets being credit and default risk-free.
3. Gold can be bought as a dollar hedge:
Though there is no direction for the US dollar, any weakness in the dollar shall be favouring gold. And as there is expected that the US central bank may again release some aid to support the economy, higher dollar liquidity will weigh on dollar and be positive for gold price.
"Gold may remain choppy as US dollar index struggles for direction amid increasing optimism about US economy as well as Fed's increasing emphasis on keeping interest rate low. We however expect to see buying interest at lower levels owing to loose monetary policy stance of major central banks and persisting virus risks," Kotak Securities said in a recent note. (With Agency Inputs)
Gold outlook is bullish
Now as broadly most experts in the domain suggest buying gold at every dip because gold price have probably bottomed out, here we tell you the different gold price levels that you should watch out for:
Amit Sajeja, Vice President - Research at Motilal Oswal said, "In spot market, gold price has strong support at $1,750 per ounce and it is expected to hit $1,820 per ounce in immediate short-term as weakness in the US Dollar (USD) against the Indian National Rupee (INR) is expected to continue further. In terms of MCX, the gold price may soon go up to Rs. 47,800 per 10 gm levels."
In the medium term, gold price at MCX may go up to Rs. 50,000 per 10 gm levels in medium-term as the spot gold price will be heading for $1,880 per ounce after hitting its immediate $1,820 per ounce target.
So for capital appreciation, portfolio diversification and to hedge against the risk from all other assets given the current turbulent times, gold is a must have and any dip can be considered taken as a perfect to 'buy' gold.