Gold Prices Outlook: Gold has fallen 18 percent from record highs.
Gold Prices Outlook: There is pressure on gold this year. Gold is still weak on MCX and has slipped below 46000 rupees per 10 grams. Gold is trading close to its 8-month low. Gold has fallen 18 percent from record highs. In August last year, gold reached its record high near 56726. That is, it has fallen by Rs 10500 per 10 grams or 18 per cent during 6 months. Expert says that such a big fall in gold has brought good investment opportunity. There are many factors that can guide the price of gold further. From the current price, at least 6000 rupees per 10 grams is showing up in the next 6 months. Expert has given a target of Rs 52500 for 6 months.
Why is gold falling?
- US Treasury Yield is seeing a boom and it has reached its 11-month high.
- With the reduction of coronavirus cases worldwide, economic recovery is being seen.
- Due to the COVID 19 vaccination, there is an upward trend in the equity market.
- There is talk of another huge relief package in the US. This is giving support to equity.
- The US dollar has strengthened in the past.
- Gold demand fell 28 per cent year-on-year to 783.4t in the December quarter, the weakest since the second quarter of 2008.
Why is gold seen fast?
Expert says that the current decline seems to be a good opportunity to buy gold. One is gold is running at a discount of 10 thousand and this price has become attractive. At the same time, high valuations of the stock market, new variants of COVID 19, factors like liquidity will drive gold prices.
- Equity markets around the world have been booming since the lockdown ended. Several major indexes are close to their record highs. They have increased by 20 to 50 per cent in the last few months. In such a situation, the valuation of equity markets is now looking expensive. On the other hand, new types of coronavirus cases are coming up in some countries including Europe. There is a fear of another wave of coronavirus. This factor is in favor of gold.
- The dollar index slipped below 90 on 31 December 2020 due to political instability in the US. It will take time now for the economy to become fully normal in the US. In such a situation, there can be pressure on the dollar right now. It is positive for gold.
- Gold plays a big role in the central bank’s reserve management. In the year 2020, the purchase of gold by central banks has decreased by 60 percent on an annual basis. But from the December quarter, it is seeing a boom. Central banks around the world are indicating to buy gold. Gold will be supported by this.
- The 10-year bond yields have increased, but the Central Bank of most countries has taken measures to stop the upside movement in it. In such a situation, the bond yields may be limited further.
How much will gold be expensive?
If we talk about 6 months ahead, gold can be expensive by Rs 6000 per 10 grams from the current level. During this time, gold can reach the level of Rs. 52500/10 gram. Talking about the next 2 months, gold is supported at $ 1783 an ounce. If a bounce comes above this level, then gold can go from 1856 to $ 1885 per ounce. On MCX, it can touch the level of Rs 49200. However, if the support level is broken, the weakness of gold up to Rs 45500 can also be seen in the next 2 months.
(Note: This information is based on the Kedia Advisory report and information from Nisha Bhat, Founder and CEO of Millwood Cane International.)